Nation Deep in Debt
The Financial Roots of Democracy
By James Macdonald
Posted January 8, 2003
Published by Farrar, Straus & Giroux
January 2003; $30.00US/$47.00CAN; 0-374-17143-2
Nowadays, the idea that the
way a country borrows its money is connected to what kind of government it
has comes as a surprise to most people. But in the eighteenth century it was
commonly accepted that public debt and political liberty were intimately
related. In A Free Nation Deep in Debt, James Macdonald explores the
connection between public debt and democracy in the broadest possible terms.
He starts with some fundamental questions: Why do governments borrow? How do
we explain the existence of democratic institutions in the ancient world?
Why did bond markets come into existence, and why did this occur in Europe
and not elsewhere?
Macdonald finds the answers to
these questions in a sweeping history that begins in biblical times, focuses
on the key period of the eighteenth century, and continues up to the
present. He ranges the world, from Mesopotamia to China to France to the
United States, and finds evidence for the marriage of democracy and public
credit from its earliest glimmerings to its swan song in the bond drives of
World War II. Today the two are, it seems, divorced -- but understanding
their hundreds of years of cohabitation is crucial to appreciating the
democracy that we now take for granted.
James Macdonald was an investment banker for many years. This is his
first book. He lives in Oxford, England.
"This is a profound and original work by an experienced financial
practitioner who understands that public debt is not just economically but
politically crucial. Macdonald has something exciting to teach all serious
students of history -- that the evolution of democratic institutions is not
just about taxation and representation but also about investment."
--Niall Ferguson, author of The Cash Nexus: Money and Power in the Modern
"In this fresh and
informative look at dollars and democracy, Macdonald reminds us why James
Carville observed that he hoped, after death, to be reborn as the bond
market. Freedom and finance are more closely entwined than we realize. A
gloriously rich history."
--Richard Parker, John F. Kennedy School of Government, Harvard University
exploration of representative political institutions and the ability of
states to borrow, survive, and prosper is history at its best. Political
liberty, sound public financial policies, and well-functioning securities
markets nurture one another, but across human history all three have been
hardly gained, easily lost, and therefore rare. It is a deep insight, one
that all who cherish freedom should understand and heed."
--Richard Sylla, Stern School of Business, New York University
"James Macdonald reveals
democracy's deepest strength: Citizens are willing to lend to governments of
their own creation. His closely studied historical episodes show that this
practice, when applied to war financing, clinched the advantage over
--Eric Jones, author of The European Miracle: Environments, Economics,
and Geopolitics in the History of Europe and Asia
"This startling and
original book traces the evolution of public debt from the Bronze Age to our
own, and in clear, lucid prose shows that successful state finances have
been both a cause and an effect of the emergence of democratic forms."
--Jonathan Steinberg, Walter H. Annenberg Professor of Modern European
History, University of Pennsylvania.