America Compared: War Debt: Britain and the United States, 1830–1900

Wars cost money, sometimes a lot of money, and nations often pay for them by issuing bonds and expanding the national debt. The British national debt grew enormously between 1750 and 1815 as it fought a great series of wars, all of which involved either its American colonies or the United States: the Great War for Empire (1754–1763), the War of American Independence (1776–1783), and the Wars of the French Revolution and Napoleon (1793–1815). Consequently, Britain’s national debt peaked in 1815 at 260 percent of its gross domestic product (GDP). Even in 1830, after years of high taxation and economic growth, the debt amounted to 180 percent of British GDP.

By comparison, the United States in 1830 was virtually debt-free, as the policies of Jeffersonian Republicans reduced its debt from about 27 percent of GDP in 1790 to less than 5 percent. Ample tariff revenues and the frugal policies of Presidents Andrew Jackson and Martin Van Buren then cut the debt nearly to zero by the early 1840s. Even the war with Mexico barely raised the level of the debt, thanks to the return of prosperity and the growth of GDP between 1844 and 1857.

Then came the Civil War, which boosted the Union debt from $62 million in 1860 to $2.2 billion at the end of 1865, a 1,500 percent increase. (The Fourteenth Amendment, ratified in 1868, declared “illegal and void” all debts incurred by the Confederacy.) In relation to GDP, the U.S. national debt shot up to 27 percent, the same level as 1790, and then — thanks again to tariff revenue — decreased gradually to about 10 percent of GDP by 1900. By then, the British national debt had fallen to about 40 percent of its GDP, as the British — the world’s strongest power — mostly avoided new wars and built a prosperous commercial and industrial economy. The cost of war, civil or international, may well be a high national debt.

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FIGURE 14.3
United States and United Kingdom National Debt as a Percentage of Gross Domestic Product, 1830–1900

QUESTIONS FOR ANALYSIS

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