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)