Public debt in classical political economy: A Comparative Theoretical Analysis of Smith, Ricardo, Malthus, and Mill

Abstract

This paper investigates the theoretical foundations of public debt within British Classical Political Economy by conducting a comparative analysis of Adam Smith, David Ricardo, Thomas Robert Malthus, and John Stuart Mill. Using a historical-analytical approach, the study examines how classical economists conceptualized public borrowing and its macroeconomic implications. The results indicate that classical thought is predominantly characterized by a fiscal pessimism regarding public debt, grounded in three core assumptions: (i) public expenditure is largely considered unproductive, (ii) public borrowing is associated with inefficient resource allocation and intergenerational fiscal burden, and (iii) market mechanisms are assumed to ensure equilibrium between savings and investment without state intervention. In this framework, public debt is often interpreted as a mechanism that crowds out private capital accumulation and constrains long-term growth. However, the analysis also highlights important internal heterogeneity. Smith and Ricardo emphasize the adverse effects of debt on capital formation and fiscal discipline, whereas Malthus introduces a demand-side perspective anticipating Keynesian reasoning, and Mill develops a more balanced approach distinguishing between productive and unproductive public spending. The study concludes that, despite its historical context, classical public debt theory remains analytically relevant for contemporary debates on fiscal sustainability, capital accumulation, and macroeconomic stability.