The Funded National Debt

The 18th century is often regarded as the pre-industrial run-up, when the necessary organizations and products were developed to industrialize with. In reality, the markets, trade routes, sources, and products had been through successive iterations over centuries. Central to the nation-state was the funded national debt, and, allied, the development of pension funds.

With no attempt at total accuracy, the French and the British had both, by the year 1800, developed systems by which a person could buy a share, which would then pay a small income. In this way the lower and middle classes of the bourgeoisie could buy a share in the stability of the state. The state became more adept at issuing notes and bonds, freeing the state from the financial markets.

Initially regarded with considerable misgivings, and muttering about how any squire doing their accounts at the kitchen table could tell you it wouldn't work. Wielded with skill, these tools worked well- the British funded the whole of the Napoleanic Wars on their national debt and the promise to pay later- and became fantastically wealthy by doing so.

By 1900, France, German, and Great Britain all had mature and functional pension systems providing some degree of financial assurance to citizens and a column of financial stability for the state. I believe the importance of pension systems, in maintaining a stable and predictable base of demand for the economy, is generally underrated.

In America in the same year of 1900 the only national pension system was the system of payments to veterans. Americans could put their money in banks, which frequently went broke, or invest in railroads, which always went broke and wiped out the smaller shareholders in bankruptcy proceedings. America did not begin the 20th century with any clear idea about social security, or the role that a national social security system might play in the national finances.

Since the beginning of Social Security the propaganda din against it has been almost deafening, but the real outlines of the system are easy enough to discern. This popular system collects almost a half of the federal revenues from taxation and is wholeheartedly supported in doing so by the general public. For 25 years the amounts collected have been greater than the amounts paid in pensions, and the Social Security system has supported the federal government financially by using the surplus to buy US treasury notes. This is the success we need to emulate in the matters of healthcare, and low-income housing linked with LEED development.

Running through all of this is the concept of a funded national debt- an important tool of good government.