DEBT, national, the engagement en tered into by a government, to repay at a future period money advanced by indivi duals for the public service, or to pay the lenders an equivalent annuity. National debts have arisen from' the necessity of obtaining larger sums of money than could be raised, at the time they were wanted, by direct contributions ; and of ten, when it would not have been abso lutely impossible to raise the requisite sum, if a heavy tax had been imposed, and strictly levied, it has been deemed more prudent to avoid the evils atten dant on such a measure by the less ob noxious expedient of a loan. In most countries, the subordinate governors, to whom is generally consigned the task of providing for the public expences, being desirous of popularity, have shown a great predilection for this mode of obtain ing money, as it enables them to support a profuse expenditure, without appearing to oppress the people in so great a de gree as they otherwise must : the system of getting into debt, or the funding sys tem, as it is generally called, from parti cular funds being usually appropriated for payment of interest on the debts contracted, has therefore been adopted by most of the states of Europe, by many of the colonies, and by the American re public.
The persons who lend the money which a government has occasion to borrow generally make a profit by it, but nothing is brought into the country, nor the least addition made to its total wealth, by a transaction of this kind ; whatever there fore is gained by any individual concern ed in it must be taken from others, and as those who lend the money are persons considerable property, and those from whom the sums requisite for paying the interest or repaying any part of the principal is to be drawn, are the public at large, it is evident that all transactions of this nature contribute to increase the existing disparity in the con dition of the different classes of the com munity, and consequently that the natu ral tendency of the funding system, when made a constant resource, is to destroy the intermedii!te ranks, and divide a na tion into the two classes only, as unequal in number as in circumstances, of very rich and very poor. It may however be carried to a very great extent, without fully producing this effect, if counteract ing circumstances exist, sufficiently pow erful to dissipate the gains of the rich nearly as fast as they are acquired, and thus prevent a rapid accumulation of wealth. This has been the case in Great Britain ; but althotigh the great increase of necessary and farhionbble expense has prevented the wealthy from becoming so enormously rich as they otherwise would have been, there can be little doubt, that taken collectively, they are possessed of more property and income than the weal thy members of the community at any former period, and that the number of poor is considerably augmented. In
a state where taxation is general, the ef fects of the borrowing system are some what retarded, by the lenders themselves contributing to the taxes levied to pay them interest, and therefore the practice may he carried to a greater extent than in those states, where particular classes, as the nobility or priesthood, are ex empt froetaxation, and under• whose privileges the money lenders may shelter themselves from contributing their just proportion.
Most governments have begun to bor row upon their general credit, without as signing any particular fund for the pay ment of the debt ; and when this resource has failed them, they have gone on to borrow upon assignments or mortgages of particular funds. What is called the unfunded debt of Great Britain is con tracted in the former of those ways ; but this is a mode which never can be car ried to a great extent, without bringing the finances of a country into disorder ; the other mode is subject to no limitation, while efficient funds can be found for securing the regular payments stipulated with the lenders. Borrowing on the se curity of particular funds is done in two ways ; sometimes the assignment or mort gage is made for a short period of time only, a year or a few years, for example : and sometimes for perpetuity. In the for IImer case, the fund is supposed sufficient l to pay, within the limited time, both prin cipal and interest of the money borrowed ; in the other, it is supposed sufficient to I pay the interest only, which is either an 1 annuity terminable at the end of a certain 1 number of years, or a perpetual annuity, which the government retains the liberty of redeeming at any time, upon paying back the principal sum borrowed. When money is raised in the one way, it is said to be raised by anticipation ; when in the other, by funding. ; The great expense attending the mo dern system of warfare appears to have created the necessity of contracting na tional debts : the practice originated in Italy, and was soon adopted in other countries, but it has been brought into a more regular system, and carried to a much greater extent in Great Britain, than in any other nation.