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opening of the land-way from the North Sea to the Persian Gulf will restore them to still greater prosperity.'*

Prof. Jäckh points out that three world-historic wills meet in conflict in this part of the world, namely, the Russian, the English, and the German. These three forces made the present war inevitable. Further, when Turkey has been reorganised, it will be the arm with which to knock at the door of Egypt, but then the arm will not be that of the 'Sick Man of Europe.' According to this writer, there is only one Power capable of reorganising the Osmanic Empire, that is, Germany; and his justification runs thus:

'Germany is the microcosm of Central Europe, by the very nature and history of her own particularism; she faced, and has solved within her own frontiers, the same problems which the macrocosm of Central Europe calls upon Germany to solve to-day. Germany is an Empire of "allied Governments and free cities." From without, this always appeared a source of German weakness; and so it was, as long as the single organs had not grown together to the unity of an organism.

"The organic principle, the principle of evolution, of uniformity and variety, by the strength of which the macrocosm lives and, vice versa, by which the single organ among the many arrives at perfection-this is the innermost thought and kernel of German mysticism; the unity of the individual and the absolute, the balance of the particular and the general, according to Leibnitz. Unity in variety and variety in unity, that is to say-harmony! And this is the ideal, the eternal theme of German thought, German life and German art, and we may add too, of German policy in and for Central Europe.'

THOMAS F. A. SMITH.

Jäckh Das grössere Mitteleuropa (Greater Central Europe). Weimar, 1916.

Art. 9.-OUR NATIONAL DEBT.

1. How to pay for the War. Essays edited by Mr Sidney Webb for the Fabian Society. Allen & Unwin, 1916. THE imminence of another War Loan once more concentrates attention on the growth and magnitude of our National Debt. To speak of the Debt as gigantic is like emphasising the fact that grass is green. Superlatives in relation to national finance have long since become so familiar by repetition that we seem to want a new vocabulary of astonishment. It is an interesting, though unprofitable, speculation to enquire if in the year 2017 this debt will be looked back upon as a comparatively small matter, just as we look back upon the debt of 1817 as a comparatively small matter. If the most enlightened man had been told in 1792 that in 1815 the interest on eight hundred million pounds would be duly paid to the day at the Bank, he would have been as hard of belief as if he had been told that the Government would be in possession of the lamp of Aladdin or the purse of Fortunatus.' This characteristic passage occurs in Macaulay's account of the origin and growth of the National Debt. How much harder of belief would the most enlightened man' have been, if he had been told that in 1917 the interest on three thousand million pounds would be duly paid to the day at the Bank'! The amount of our aggregate liabilities on March 31 next is expected to be 3,755,000,000l. *; and, although probably nearly a thousand millions thereof represent money lent to our Dominions and Allies, the whole sum has nevertheless to be treated as a liability, and interest upon it, whether for a longer or shorter term, will have to be paid. Presumably the borrowers of the thousand millions aforesaid will pay interest for it at stated times, so what

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* Mr McKenna's estimate was 3,440,000,000l., but since then there has been an increase of more than 300,000,000l. in the expenditure over the estimates. Nearly half of this is represented by floating debt, consisting of bills issued at a discount, and not carrying interest, but it is continually falling due, and must, in the course of a year at the outside, be paid off or renewed. As the former alternative is impossible, the only question is as to the method of continuing the liability, whether by new Treasury bills or by the issue of a long-dated loan.

this country will actually have to find will be the interest on a net debt of 2,955,000,000l. On March 31, 1914, the National liabilities amounted to 707,654,000l. During 1914-15 a sum of 458,000,000l. was added; and during 1915-16 a sum of 1,031,637,000l. (after allowing for the effect of conversion). Thus, on March 31, 1916, there was already a total of 2,197,500,000l.; and the estimated addition for the current year, together with unforeseen expenditure, will bring up the figure on March 31, 1917, to 3,755,064,000l. gross, without reckoning the Japanese loan. What is pertinent to Macaulay's remark is, that taxes have already been imposed which, if their present yield can be maintained, virtually ensure the certainty that the interest will be paid.

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Such an enormous growth in so short a time dwarfs all previous records. Even in the long conflict with France, first with the Revolutionary Government and then with that of Napoleon, extending, with a brief interval, over a period of twenty-three years, the addition made to the Debt was not much more than a fourth of that for which the present war is so far accountable; and no one can say how much smaller that fraction may be made by new borrowings. There are possibilitiesindeed, probabilities-lying behind the qualifying words so far' which forbid us to suppose that the net debt of 2,955,000,000l. can be regarded as the limit. War has always been the prolific mother of expenditure and the origin, at all events in modern history, of public debt. During the last two centuries, in particular, its insatiable maw has periodically consumed our substance and loaded us with liabilities. The War of the Spanish Succession added nearly 38,000,000l. to the Funded Debt, the Seven Years' War added 64,000,000l., the American War of Independence over 121,000,000l., the Great War (it must surrender that distinctive title now) close upon 604,000,000l., the Crimean War 34,000,000l., and the South African War 160,000,000l. Yet the total of all of these is almost trivial in comparison with the addition for which the war of to-day is already responsible.

During the prosperous intervals of peace there have been occasional reductions on a slow and relatively nibbling scale, but, before time enough has elapsed to bring about any appreciable diminution of the amount Vol. 227.-No. 450.

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annually set apart for the service of the debt, the costly tide of conflict has flowed again and has quickly engulfed our pitiful economies. It took forty years of peace to pay off 75,000,000l. of the 600,000,000l. added during the war of a hundred years ago; the 34,000,000l. added in the Crimean War were not wiped out in less than twelve years of peace; and the additions caused by the South African War had been but slightly diminished, when the present colossal struggle was forced upon us. It seems to be the fate of humanity to experience these set-backs. The labours of Sisyphus were not more futile than have been the peace-time efforts to lessen our National Debt.

The fact nevertheless remains that, in nearly every instance, the economic waste and financial loss caused by our great wars have been followed by a steady industrial recovery, an increase of national wealth, and an improvement in the standard of personal welfare. And in no equitable review of history can we escape from the conclusion that in not a few cases these conflicts have proved to be, in the larger patriotic sense, a wise and prudent investment. This was especially so with the struggle that put an end to the ambitious dreams of Napoleon, in spite of the ruinous rates at which money had to be raised for carrying it on; and the cost of crushing Prussian militarism and safeguarding the liberties of the smaller European States may equally be looked upon as an insurance, albeit at an appallingly high premium, against the destruction of those ideals of civilisation and progress that Britons hold dear. This view of war expenditure is forcibly put by the late Mr McCulloch, the eminent economist, in the following passage:

The integrity and increase of our Dominions, the protection of our rights and liberties, and our triumphs by sea and land, are the real equivalents for the public debt, and of all the blood and treasure we have spent in warlike enterprise; and they are quite as ample and conduce as much to our prosperity as a nation as if they had been realised in an increase of wealth and population. No sacrifices can be too great that are required to preserve national security and independence, and a loan expended on armies and fleets employed for such a purpose is quite as well and profitably employed as if it had been laid out on agriculture or in promoting manufactures or trade.'

David Hume's narrow and unimaginative theory of National Debt has never found acceptance in this country when it became a question of resisting the ambitious policy of European rivals. One can picture the sort of reception that would now be given to any economist who ventured to adopt Hume's unpatriotic sentiment: 'Better for us to have been conquered by Prussia or Austria than to be saddled with the interest of 140,000,000l.' Most of us think, on the other hand, that it would be infinitely better to saddle Britain with a debt which would take a century to repay, than that she should be condemned for all time to be the vassal of Prussia.

It is well to know clearly what we mean by National Debt. Formerly the term was generally employed to describe funded debt only, though the irredeemable part of it could not be strictly called debt at all, the obligation of the State being limited to payment of the interest in perpetuity. Unfunded debt was scarcely thought of in connexion with National Debt, because it was a more or less temporary arrangement, and only on rare occasions attained proportions which gave it exceptional importance. In 1816 the unfunded debt amounted to 50,000,000l. out of 846,000,000l.; in 1869 to 9,000,000%. out of 749,000,000l.; and in 1885 to 14,000,000l. out of 654,000,000l. To-day unfunded debt is a vastly more formidable item, notwithstanding the certainty that a large proportion of it will have to be converted by means of a loan into a long-term or 'semi-permanent,'* instead of a short-term liability, and will thus become merged in the so-called Funded Debt. It consists mainly of Treasury Bills, Exchequer Bonds redeemable in three and five years, two-year War Expenditure Certificates, and miscellaneous liabilities, including loans by foreign countries and War Savings Certificates. It is difficult to get from available data an accurate estimate of the national indebtedness at any specified time, since the dates which apply to some of the figures do not apply to the others, and changes, especially in the floating debt, are continually going on. Roughly, however, after

*This is a City coinage of which the most that can be said is that it " means well.'

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