226 THE ECONOMIC EFFECTS OF 
these days to defend the latter have been used, very lightly 
disguised, in the last fifty years to justify the former policy. 
These arguments will be quite familiar; but it will at least 
crystallize the discussion if they are restated here. In relation 
bo state borrowing the justification takes the following forms: 
(i) That there is a vast difference to be observed between the 
character of the public debt of a mature community like that 
of Great Britain where the debt represents unproductive ex- 
penditure ‘incurred mainly for war purposes and leaving assets 
that are of comparatively small value’, and that of countries 
like Australia and Canada which has resulted in the creation 
of assets ‘worth to the developing country (and presumably to 
the creditors) at least as much as the amount of the public 
debt, omitting only the war-loans’.! 
(ii) That in a new country like Australia ‘the scope of general 
government—owing to the peculiar conditions of lands thinly 
peopled, with vast undeveloped areas—embraces many func- 
tions which, in the earlier stages of development, would be 
impossible to resign either to local bodies or to private enter- 
prise.2 
(iii) That the proportion of the Australian debt to the national 
wealth, even under the urgency of development, is not greater 
than that of older countries whose financial stability is un- 
questioned. In particular that a comparison of the proportion 
of the public debt not covered by assets, £153 per head in the 
case of Great Britain, £43 per head in that of Australia, demon- 
strates the essential soundness of the Australian position ; and 
that while ‘the interest on the public debt of Great Britain 
in relation to total income was as 8-1 to 100, the interest bill 
of Australia bore to total income the ratio of 7-1 to100, although 
the Australian public debt to the extent of about one-half is 
held externally, while the outside public debt of Great Britain 
amounts to only one-eighth of the whole.’3 
(iv) That it is impossible in any other way than by resort to 
overseas loans to procure the necessary permanent equipment 
necessary for an expanding population; and that the policy 
of entering into partnership with foreign capitalists, instead of 
‘J. R. Collins, The Public Debts of Australia, p. 6. 
 R. M. Johnston, State Borrowing, p. 4. 
} Collins, op. ¢cit., pp. 9 ef seq.