What warning did David Hume, the 18th-century Scottish philosopher-economist, give regarding lending to sovereign governments?
Hume thought no good could result through borrowing:
If the abuses of treasures [held through the state] be dangerous through engaging the state in rash enterprise in confidence of its riches; the abuses of mortgaging are more certain & inevitable: poverty, impotence, & subjection to foreign powers.
Nations, presuming they can determine the essential lenders, are tempted to borrow without limit and to squander the funds on unproductive projects:
This is very tempting to a minister to use such an expedient as enables him to make great figure throughout his administration without over burthening the people along with taxes or exciting any immediate clamorous against himself. Hence, the practice of contracting debt will almost infallibly be abused in every government. It would scarcely be more imprudent to give a prodigal son a credit in every banker’s shop in London than to empower a statesman to draw bills in this manner upon posterity. However, eventually, interest have to be paid and the burden of debt service charges will drop heavily on the poor:
The taxes that are levied to pay the interest of these debts are domination on the poorer sort.
Those same taxes “hurt commerce & discourage industry” and therefore inhibit economic development & condemn the borrowing nation to continuing poverty. The debt burden will also pauperize the affluent merchant & landowning classes which constitute the basic bulwark of political freedom & stability. Along with the pauperization of the middle class:
No expedient at all remains for resisting tyranny: Elections are swayed through bribery and corruption alone: And the middle power among king & people being completely removed, a grievous despotism has to infallibly prevail. The landholders [and merchants] despised for their oppressions, will be absolutely unable to make any opposition to it.