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Published also as Studies in history, economics and public law, ed. by the Faculty of political science of Columbian university, vol. LXXXV, no. 2, whole no. 197. ; Vita. ; Bibliography: p. 100-105. ; Mode of access: Internet.

The present paper is intended as the background to a more detailed discussion of the facts of agricultural debt adjustment. I propose to discuss briefly the nature and objectives of our machinery of agricultural debt adjustment, the background against which it works, and some of the more important difficulties encountered in practice. The observations are based largely upon experience acquired in the West, although the setting concerns the country as a whole.Problems of debt adjustment are primarily problems in the economics of distribution. Measures taken in this direction affect transfers of income between individuals, groups, and sections of the country. Their chief objective is to relieve the pressure on exposed groups and to allay the tensions created thereby. They constitute a part of the machinery of adjustment so essential in an economy subject to extreme variation of income and afflicted with rigidities which obstruct or divert forces tending to equilibrium. The tendency has been to concentrate upon the economics of the long run and to ignore obstacles to the free play of such forces. The importance of these obstacles is most manifest in the lower phases of the business cycle, and the presence of corrective or compensatory measures is in large part due to the cumulative effects of the inflexibility characteristic of a continental type of development and to the difficulty of planning for an economy in which variability is so marked. The results are seen in a wide range of expedients of which debt adjustment is an example. Difficulties arise owing to the failure to distinguish between social and pecuniary costs, to the widely different interpretations of what the term "justice" implies, and to differences in points of view which range from an insistence upon a strictly legal interpretation of rights and obligations to demands for debt reductions upon the basis of present income.

"Mr. Micawber conjured me to observe that if a man had twenty pounds a year for his income and spent nineteen pounds nineteen shillings and sixpence he would be happy, but that if he spent twenty pounds one, he would be miserable. After which he borrowed a shilling of me for porter and cheered up." Mr. Micawber's philosophy illustrates remarkably well the theory of National finance as it ought to be, and his practice illustrates equally well State finance as it usually is. In fact, one would almost think that to emulate Mr. Micawber's proficiency in the gentle art of "finance" was the "summum bonum" in the existence of every State. Whether in national or provincial finance, it is the common practice to spend more than is received. The resultant pressure of immediate liabilities forces the government to resort to further borrowing, and it cheerfully borrows the shilling to pay for the porter, unmindful of the retribution which must follow. Public borrowing is not necessarily an unsound financial arrangement; but it is to be remembered that even when that is the case the future and not the present must make the sacrifice. Public debt is a mortgage on future revenue. It must always, in the long run, be repaid from the proceeds of taxation. Regardless of this fact it has grown rapidly during the past century. It is thought by some to be inevitable - after all else is gone our public debt will remain. This opinion is supported by the history of public indebtedness in all countries.