It can hardly be doubted that there must have been some great fallacy in the notions of those who uttered and of those who believed that long succession of confident predictions, so signally falsified by a long succession of indisputable facts. To point out that fallacy is rather the office of the political economist than of the historian. Here it is sufficient to say that the prophets of evil were under a double delusion. They erroneously imagined that there was an exact analogy between the case of an individual who is in debt to another individual and the case of a society which is in debt to a part of itself; and this analogy led them into endless mistakes about the effect of the system of funding. They were under an error not less serious touching the resources of the country. They made no allowance for the effect produced by the incessant progress of every experimental science, and by the incessant efforts of every man to get on in life. They saw that the debt grew; and they forgot that other things grew as well as the debt.
A long experience justifies us in believing that England may, in the twentieth century, be better able to bear a debt of sixteen hundred millions than she is at the present time to bear her present load. But be this as it may, those who so confidently predicted that she must sink, first under a debt of fifty millions, then under a debt of eighty millions, then under a debt of a hundred and forty millions, then under a debt of two hundred and forty millions, and lastly under a debt of eight hundred millions, were beyond all doubt under a twofold mistake. They greatly overrated the pressure of the burden: they greatly underrated the strength by which the burden was to be borne.
It may be desirable to add a few words touching the way in which the system of funding has affected the interests of the great commonwealth of nations. If it be true that whatever gives to intelligence an advantage over brute force and to honesty an advantage over dishonesty has a tendency to promote the happiness and virtue of our race, it can scarcely be denied that, in the largest view, the effect of this system has been salutary. For it is manifest that all credit depends on two things, on the power of a debtor to pay debts, and on his inclination to pay them. The power of a society to pay debts is proportioned to the progress which that society has made in industry, in commerce, and in all the arts and sciences which flourish under the benignant influence of freedom and of equal law. The inclination of a society to pay debts is proportioned to the degree in which that society respects the obligations of plighted faith. Of the strength which consists in extent of territory and in number of fighting men, a rude despot who knows no law but his own childish fancies and headstrong passions, or a convention of socialists which proclaims all property to be robbery, may have more than falls to the lot of the best and wisest government. But the strength which is derived from the confidence of capitalists, such a despot, such a convention, never can possess. That strength – and it is a strength which has decided the event of more than one great conflict – flies, by the law of its nature, from barbarism and fraud, from tyranny and anarchy, to follow civilization and virtue, liberty and order.
Lord Macaulay, The History of England, 1979, London: Penguin Books, pp 497-8