PUBLIC LOANS.

New Zealand Mail, Issue 23, 1 July 1871, Page 12

PUBLIC LOANS.

Opinions, like the fashions, change with the times, and that which is considered absurd at one period, will be viewed as a matter of course, at another. In the last century, it was the fashion to maintain that the national debt was a blessing ; and a doctrine of a somewhat similar character is now in vogue. Statements are published to show that those nations which have the largest public debts are the most wealthy and prosperous. There can be no doubt about the fact; but how about the inferences? Is the prosperity the consequence or the cause of the indebtedness ; or does not each act and re-act upon the other ? Now we know that the very large debts of large nations have been incurred to meet war expenditure, which is very nearly equivalent to annihilation of wealth so invested. If, then, loans thus wasted have been attended with progress, how much greater progress should attend the 'borrowing of capital with which to outfit a young colony, with roads and population, without which the growth of both would be slow. More than 190 years ago, Bolingbroke and David Hume ably combatted the arguments of the writers in their day, who maintained that those nations which had the largest public debts, and which were consequently burdened with the heaviest taxes, were the most wealthy and prosperous. They vindicated the assumption that public incumbrances are of themselves advantageous, independently of the necessity for contracting them, and of the purposes for which they were applied. They pointed out that if this was the case, those States could not possibly have embraced a wiser expedient for promoting industry, commerce, and riches, than the creation of funds, and debts, a ad tanes, without limitation ; and they showed how paradoxical and absurd all this was. On the other side, it was urged that England was no weaker on account of her debts, since they were mostly due to Englishmen, and brought as much to one as they took from another. Like transferrin** money from the right hand to the left, the individual or nation was left neither richer nor poorer than before. Though Hume, in replying, had the best of the argument, it must be owned that the conclusions to which the arguments led have not been established. He thought that he had succeeded in proving by demonstration that the public credit of England would shortly perish, either by the doctor, by nature, or by violence. But, in opposition to his conclusions and predictions, the fact stares us in the face that the public credit of England was never more sound than at present, though her debt since the days of Hume has been enormously augmented. Still, it appears as absurd now, as it did then, to assume that the indebtedness of England was the cause of her industry, commerce, and riches. It seems to us much more probable that it was her industry, commerce, and riches, which sustained her public credit, and enabled her to bear a debt with ease which a less wealthy country would have sunk under. Be this as it may, we are persuaded that the same arguments, whether as regards loans or taxes, which are found to° apply to an old country, are not equally applicable to a new one, for the simple reason that the circumstances of the two are so widely different. Southey lays it down as an axiom, that a liberal expenditure on national works is one of the surest means of promoting national prosperity. It may be so, though South Australia and Southland were nearly ruined by such an expenditure. In a new country it depends almost entirely on the nature of the works whether such an expenditure will prove a curse or a blessing. "We need not go to old countries to obtain lessons about the wisdom of borrowing. New Zealand less resembles England and the United States, than it does a large, valuable, and wild estate, in an out of the way place, which the owner has not the means of either stocking or cultivating. He can borrow money on mortgage ; but it depends altogether upon the mode in which he expends the loan thus obtained whether he becomes a wealthy man or a beggar by the operation. If he would sooner go without a market for his produce than bring his farm, by means of road, in proximity with one; if he proceeds to buy more land instead of cultivating what he has already ; if he builds a fine house, and neglects to build out houses ;

if he expends on fine clothes, carriages, and furniture the money required for farm implements and machinery; and if he leaves his farm half stocked for the sake of fully stocking his cellar, he had much better have remained satisfied as he was then run into debt under such circumstanc3S. But if he expends the loan on making his land more productive, and in bringing]! t, in efflect, nearer to a market, the interest he will have to pay will be a trifle compared with the profits he will realize. It will be just the same with New Zealand ; for it depends altogether on what objects, and in what manner, her loan is expended whether it proves a blessing or a curse, as in the farmer's case produced as a parallel.