If it imports for the purpose of increasing its productive power by
buying such things as railway material, then it is making a perfectly
legitimate use of its credit, as long as the money is well spent, and
the railways are honestly built, with a prospect of opening up good
country, and are not put into the wrong place for political or other
reasons. But if this were so, the money would not be wanted to balance a
Budget, but on railway capital account. When a balance has to be filled
by borrowing it can only mean that the State has spent more than its
revenue from taxes permits, and that it is afraid to cut down its
expenses by retrenchment or to increase its revenue by taxing more
highly. And so it chooses the primrose path of dalliance with a
moneylender.

As to naval expenditure, here again we have bad finance writ large over
the proposal. It is not good business for countries to borrow in order
to increase their armies and navies in time of peace, and the practice
is especially objectionable when the loan is raised abroad. In time of
war, when expenditure has to be so great and so rapid, that the
taxpayers could not be expected to have it all taken out of their
pockets by the tax-gatherer, there is some excuse for borrowing for
naval and military needs; though even in time of war, if we could
imagine an ideal State, with every citizen truly patriotic, and properly
educated in economics and finance, and with wealth so fairly distributed
and taxation so fairly imposed that there would be no possibility of any
feeling of grievance and irritation among any class of taxpayers, it
would probably decide that the simplest and most honest way of financing
war is to do so wholly out of taxation. In time of peace, borrowing for
expenditure on defence simply means that the cost of a need of to-day is
met by someone who is hired to meet it, by a promise of interest and
repayment, the provision of which is passed on to the citizens of