A Free Nation Deep in Debt

A Free Nation Deep in Debt isn’t really a history monograph and isn’t really a textbook on finance. It helps to have a bit of background and interest in each of those fields, to know who the Habsburgs were and the difference between debt and equity. If these questions actually interest you, this is a cracking brilliant book, and loads of fun.

Basically, James MacDonald provides a whirlwind history of national debt in the West, with an eye to the relationship between a government’s ability to raise money and its political structure. His thesis is something that Adam Smith and the political œconomy wonks of the 18th century knew in their bones but we’ve lost some sight of since then: there’s a natural connection between democracy and borrowing capacity. You can spin this observation in a number of different directions: contrast the idea that responsible political controls by a wealthy citizenry make nations less likely to default, and therefore able to get better interest rate with the idea that people living under a democracy will happily pay taxes at a rate far above the rate that would cause open rebellion against a king.

The real geeky fun of this book, however, consists in the cheeky fun of looking at all of Western history as though it were merely the story of finance ministries. It turns out that looking at things this way provides both a neat synthetic overview of the history of finance and financial markets and also a useful sidelong perspective on some pressing issues of globalization. Plus, I picked up all sorts of neat historical tidbits: the aforementioned Habsburgs, for example, went bankrupt about once every twenty years in the late 16th and early 17th centuries.