Review of A Free Nation Deep in Debt: The Financial Roots of Democracy (Hardcover)

"A Free Nation Deep in Debt" is James Macdonald's first literary contribution to the field of political economy and it is rich in historical detail, a fact which may make it a challenging read for anyone unacquainted with ordinary economic history and its specific historiography. Macdonald, an investment banker for many years who now lives in Oxford, England, discusses the idea that the way a country borrows its money is associated with what kind of government it has. In his discussion, Macdonald traces the evolution of public debt from antiquity to the present, arguing that public finance and political freedom are more closely interrelated than most people realize.

For those who like some structure in a book of this complexity, it can easily be divided into an introduction and four main sections. The first seven pages, with the title "Introduction: The Financial Roots of Democracy," sketches out what is to come, providing the reader with a framework for the coming text and raising the essential questions with which the author will wrestle.

The first section traces the history of public finance and political freedom from the end of the Bronze Age to the end of the Dark Ages, contrasts two different types of finances -- tribal and imperial, explains the historic advantages of autocratic government, considers the critical period when some of the emerging societies settled down and civilized themselves without losing their political freedom, and, in regard to the so-called Dark Ages, asks why they had a more intense and enduring effect in western Europe than in other places. This initial section sets the stage for a comprehensive description of the relationship of public finance and political freedom in the Middle Ages and modern times.

The second section deals with medieval Europe. It was to be the role of medieval Italian city-states to bring back the idea of democratic public financing and modify it so it could become a workable plan for public financing. According to Macdonald, "The system that they created, although in one way fatally flawed, set off a chain of events with results that no one could have predicted." The third section of the book continues the discussion of public finance by looking at the attempts of other European states to come to terms with the implications of the Italian strategy.

The fourth and final section considers events after the French Revolution, and the author suggests that "The outcome of the Napoleonic Wars demonstrated the superiority of a political system based on the alliance of parliamentary government and public debt, but now there was a new question: Would a system created in a world of restricted citizenship and limited franchise prove compatible with universal suffrage. It was the role of the nineteenth century to find a solution to this problem. In the devastating wars of the first half of the twentieth century, this solution was put to the test." And Macdonald concludes that "The First World War was the apotheosis of 'democratic' public finance, the Second its swan song."

Throughout the reading of "A Free Nation Deep in Debt," one is struck continually by both the historical detail the author has uncovered and the factual surprises which he springs on the reader. How many of us realize, for instance, that the problem of public financing was intimately related to the fall of Rome or that in the eighteenth century it was commonly accepted that public debt and political liberty were intimately related? Regarding our own time and country, how many of us realize that the role played by the United States in World War I was funded with public debt?

I will leave it to the experts in economic theory and history to evaluate what appear to be Macdonald's conclusions in this romp through political economy from ancient Mesopotamia to the United States in the twentieth century. Has public borrowing from citizens in times of war gone hand in hand with modern democracy, as Macdonald argues? Does he present a compelling case showing why a democratic government is able to borrow more cheaply from its citizen-lenders than an autocratic state who does not consider its citizens to be equals? Was, in fact, World War II the "swan song" of democratic public financing? And, if true, has this occurred as a result of a decline in the public's trust of government, particularly in Western nations, combined with increasing globalization of the economy?

Readers can decide for themselves whether Macdonald adequately answers the above questions, as well as the other questions he tackles. Suffice to say, "A Free Nation Deep in Debt" is a comprehensive and detailed consideration regarding a certain aspect of economic history, specifically the relationship between public financing and political freedom. Certainly an interesting read, but let the reader beware. This scholarly book is definitely not Sunday afternoon "leisure" reading.

Fortunately for the reader, this book is enhanced with a detailed appendix of notes on currencies which describes them and sets out their relationships in historical context. Furthermore, a helpful glossary is provided which explains the technical terms used in the text, although the educated reader will not have much difficulty with the terms as they are used since they are explained as they occur within the text itself. The author has also provided thirty-five pages of notes, a 21-page bibliography, and a useful index with both major and minor topics listed.



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