Civilization / Ecology / Economy / Ethics / Politics / Uncategorized

Two Kinds of Debts

File:Lacanja burn.JPG

A lot is written today about debts of governments. I want to make a short note on this topic. I think we must distinguish between two types of public debts.

On one side are exploitative debts. Governments have financed some things that are short-lived and of no use to future generations. This includes debts made to bail out private banks in the wake of what is called the “financial crisis”. I call these debts exploitative because if we inherit them to future generations that means we are living at the expense of future people. Our governments take credits, spend money for things we or some of us are benefitting from and then pass on the credits to future people who get nothing but the debts. That is exploitation. It is ethically unacceptable. It would be a crime.

It is important to understand here that the idea that economic growth will take care of these debts and that it is therefore not necessary to pay them back is wrong. On a finite planet like ours, there is a very real limit to economic growth and crossing that limit will lead to disaster. We are almost there. Economic growth is not the solution, it is the problem.

This exploitative part of our debts must be completely paid within the lifetime of our generation. Everybody should contribute to this according to their financial capability. This means that rich people would have to part with some of their riches. This would be justified because if taxes had been high enough for governments to pay for all those things without taking credit, the exploitation of future people would not have arisen in the first place. As a result, the rich would not have become so rich. So they became richer by a legal situation that enabled them to pay less tax and forced governments to take credit instead. With other words, they became richer than they should be by exploiting future people. This should be corrected. Therefore, a special tax should be taken, depending on property and income, to pay back the exploitative part of the debts within a limited time (say: up to 30 years). The largest share of this money will have to come from the rich (who will still be rich afterwards, so what are they complaining about).

Another part of the debts is non-exploitative because it is used to finance things that give an advantage to future people. Let me call it sustainability debt. Future people will have to pay but they would get something in return. This would include public credits for things like:

  • Preservation of ecosystems and biodiversity (e.g. by buying ecosystems and fishing rights)
  • Preservation of cultural heritage
  • Creating a sustainable energy infrastructure
  • Buying fossil fuels and mining rights for them in order not to burn them
  • Buying raw materials that would otherwise be used up (raising the price up to the level where recycling becomes cheaper)
  • Cleaning up environmental damage
  • Scientific research (producing knowledge that can be inherited to future generations)

I think that it is justified to let future people take a share in the costs of such things because they are in their interest. I see a great necessity to invest heavily into these and similar things in order to convert our civilization into something sustainable. Here credit should not be limited and we should not hesitate to let our central banks create as much money as is necessary to do so because the alternative would be the destruction of our planet. This would lead to some kind of inflation (unsustainable things would become more expensive until they are no longer economic), but this is necessary.

So our governments should not try to limit or reduce debts in general. Instead, they should reduce the exploitative debts down to zero and raise the sustainability debts to whatever level is necessary.

Note that I have discussed related ideas before on this blog in the semi-fictitious article https://asifoscope.org/2012/11/28/saving-the-world-with-a-time-machine/.

(The picture is from http://commons.wikimedia.org/wiki/File:Lacanja_burn.JPG)

15 thoughts on “Two Kinds of Debts

    • NASA is a borderline case. Some scientific research is useful for future people so it is justified to let them take part in the expenses. But one would have to look into it in detail to see if it is fair to pass on some of the costs to them.
      A lot of the stuff that NASA is doing is of questionable value. The scientific output of the international space station, for example, is very small in relationship to the expenses. The trips to the Moon in the late 1960s and early 1970s where just a cold war propaganda thing. The scanty scientific output of that program (in relation to the costs) could have achieved for a fraction of the costs with unmanned missions. The same, I think, would be true for manned Mars missions.
      When they where flying to the moon, I was a child and of course I wanted to become an astronaut, what else? For an 8 to 12 year old boy interested in science that stuff is fascinating. But it is necessary to grow up. Some people haven’t.

      • Hmmm…I suppose if a country must choose between military expense and space programs then it isn’t a priority. I also love astronomy but agree with you about the cost of missions.

        • I am not so sure that is the choice for the US. I think the USA could comfortably live with a much smaller military program. With regard to the space program, I have doubts especially about the manned programs.
          I think these things should be reduced. The money and the workforce should be put at other things, like, for example, large scale solar and wind power and the modernization of the electric grid. For example, there are large areas in the southwest that would be good for solar power, production could be in places that now depend on things like military and space technology and industry. Restructuring these things would take time, but I think it is possible and would be advantageous.
          I think the real choice is more between military and environment. The US economy is very wasteful in terms of energy, raw materials and the environment in comparison with most other economies. That should be seen as a potential for improvement that other economies no longer have.

  1. This is all very fine as far as it goes. However, problems cannot be solved using the same principles and reasoning that created them.

    Our “economies” and monetary systems require radical and fundamental change if there is to be any chance of salvaging a civil society and leaving a world fit for future generations to inhabit.

    If there are to be “nations”, “governments” and “economies”, then it must be the most sacred duty of said governments to create the “money” and spend it into circulation, interest free.

    Nothing having to do with the monetary system of a nation should ever be allowed to fall under the control of the private sector.

    “The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.”
    Abraham Lincoln

    The privately owned, for-profit, international banking cartel is operating a monetary system based upon usury.

    “Once a nation parts with the control of its currency and credit, it matters not who makes the nations laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.”
    William Lyon Mackenzie King, the tenth Prime Minister of Canada from December 29, 1921 to June 28, 1926

    Unless and until the banking and monetary systems are nationalised, that is to say made public, there is no chance of repairing the damage that’s been done by the so-called “financial industry”. Now there’s a non sequitur if I ever heard one.
    http://chimaeraimaginarium.wordpress.com/2012/07/28/modern-religion-a-rose-by-any-other-name/

    • Of course this distinction is just one little building block, not an in-depth analysis of the problems or a panacea to solve them.

      I would not be astonished if the whole banking sector will end up in the hands of governments by itself in the not so distant future. We have become used to talk about a “financial crisis”. The word “crisis” has a connotation of being temporary, something that will eventually go away, but I think it will not. I think what we are seeing here is not a “crisis” but the beginning of the end of the era of economic growth. More and more, we are reaching the limits of the resources of the planet. The growth-curve of world economy is starting to get flatter.

      (This can be seen, for example, by the fact that over the last 10 years or so, life insurers have increasingly reduced the guaranteed interest rates they are offering. They have removed stocks from their portfolios because they are too risky and volatile. I think the real reason for this is that economy is not really growing so much again.)

      As a result of the flattening of the growth curve, investors, used to get a certain level of return, will put money again into speculative schemes. In speculation, the profit of one is the loss of others. For some time, everybody seems to be profiting, until the bubble bursts. The gains in the beginning reappear as losses later on. What we are seeing is a sequence of speculation bubbles (big ones and smaller ones) like the dot-com-bubble, the Asia-crisis, and the big real-estate bubble that burst in 2008. This is going to repeat itself in one form or the other since the basic structures have not been changed. We will see it again.

      As a result, small banks will go broke and big ones will end up in the hands of governments.
      As in 2008, large amounts of debts will end up with the taxpayers (where they don’t belong). To get rid of these debts, I see two ways. Either inflation or taking the money where it went to, that is the rich people to whom the large profits went. We will see what will happen.

      What would be necessary is a transition to a steady-state, i.e. non-growth economy. In such an economy, there is no net profit. Money and the economy would have to work according to different rules then. For example, if there is no net profit, it does not make sense to allow interest on savings and credit. You would need mechanisms instead to limit the amount of wealth somebody can have (e.g. by introducing a 100% inheritance tax above some small inheritable amount, or by not allowing interest on credits).

      If you allow people to enrich themselves without limits in such an economy, everything would end up in the hands of a few people and everybody else would be extremely poor. Such a society would be unstable and prone to have a revolution.

      • As usual we are mostly in agreement. We tend to stumble over semantics and that’s just a common glitch of language.

        As I see it, a successful civilisation would be global and have a resource based economy for which no currency whatever is necessary.

        I agree that our financial “crisis” is nothing of the sort and will certainly not go away in the sense that people are hoping for, that is a return to “normal”. What people fail to understand is that what they have accepted as normal is the problem, not the solution.

        I would be very pleased indeed to live long enough to see the end of impossible quest for endless economic growth. Unlimited growth is the strategy of a cancer, not a civilisation.

        If there must be “money”, as far as taxes and revenue are concerned, with a proper monetary system controlled by a proper government, no taxes would be needed and revenue for necessary government spending and whatever commerce and buying the people may engage in would be no problem as long as profit is not a part of the equation.

        • We probably agree on many things and disagree on a few, but with a large overlap of our opinions, and this is not bad.

          If we where in total agreement, one of us could stop blogging here for reasons of efficiency and there would be no necessity for discussion 😉 Generally I think that we are, as you once put it, on the same page.

          “Unlimited growth is the strategy of a cancer, not a civilisation.”. Excellently put!

  2. I would like suggestions for a better term instead of “sustainability debt”. It should somehow express that this part of the debts is non-exploitative and can be seen as a payment for advantages given to later people (in a kind of “trade with the future”).

  3. Pingback: Trans-Temporal Exploitation | Embassy of the Future

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