June 25, 2012

Government Debt: The Price We Pay

There is a fascinating passage in Pavel Stroilov’s book Behind the Desert Storm [1]. It is a transcript from a discussion between Soviet leader Mikhail Gorbachev and Egyptian President Hosni Mubarak. Gorbachev wants to know where Mubarak gets his country’s money from. “Is it flowing in the Nile?” he asks. Mubarak replies that, “Everyone has debts in today’s world.” He went on to say that Egypt only accepted non-repayable aid. “Nowadays,” Mubarak explained, “almost nobody repays debts. I am talking to you absolutely frankly.”

It is nothing for governments around the world to acquire debt. They do so without thinking of the consequences. Consider Mubarak’s words: “almost nobody repays debts.” He is talking about the state, about government. It is no longer shocking that enormous government indebtedness has grown up on every side. The Economist has a global debt clock [2], which provides a minute-by-minute tally of “government debt across the planet.” As of this writing, that number is over $45.6 trillion. Government “debt across the planet” in 2000 was around $18.7 trillion. That means government debt worldwide has grown by a factor of 2.4 in 12 years. How much did the global economy grow? The Gross World Product [3] (GWP) has grown from an estimated $41 trillion in 2000 to $70 trillion in 2012 – or by a factor of 1.7.

Through these figures we find that government debt worldwide is growing faster than the global economy. We see the consequences in Europe, and there will be consequences in America as well. Numbers don’t lie. There is a general trend toward higher government indebtedness worldwide, led by the United States. Some might blame this situation on the global economic crisis which began nearly four years ago. Government is now obliged to make up for people’s losses. Of course, not all losses are covered, not all businesses are propped up. Here the modern economy has become politicized in the sense that some sectors of the economy, some businesses, are thought to be essential. As someone famously said, they are “too big to fail.” This only means that government subsidizes their failure.

Every emergency now becomes a pretext for bungling government action and expense. Since governments cannot pay for bailouts and increased public assistance out of revenue, there must be borrowing. Even in good economic times the U.S. government was far from living within its means. Now the situation has become aggravated, and government debt grows faster than the economy. Government becomes the parent, the citizens become children. And they will soon find that they are abused children. In Carl Jung’s Undiscovered Self, we read of the outbreak of a global “neurosis” which spreads through the adult population – facilitated by government. As the state intervention grows, the individual shrivels. The idealist uses the state to solve social problems, to cure the ills of society. But this cannot work, says Jung: “The mass State has no intention of promoting mutual understanding and the relationship of man to man; it strives, rather, for atomization, for the psychic isolation of the individual. The more unrelated individuals are, the more consolidated the State becomes….”

The growth of the state and rising government debt has a social cost, a moral cost, and a psychological cost. Government now intervenes in every area of life. Government’s divorce policy and family court system in the United States, for example, constitutes one of the greatest institutions of plunder ever devised. Jung warned against “apparent morality … [cloaked] in deceptive colors [beneath which there lies] a very different inner world of darkness.” The growth of the state is sinister, and the growth of government debt is a dark promise indeed. Claiming to help the economy out of trouble, the state interferes with the necessary process of creative destruction. Even worse, however, the state interferes with the family and the self-worth of the individual; for the state gains in power at the expense of the family and the individual.  The moral backwardness today may be blamed on the state. The financial crisis has the state’s finger prints upon it. The more the state does, the more the society disintegrates. This is not mere economic harm, but spiritual harm as well.  

It is a moral axiom that pain is necessary to life, since it is the signal for taking protective measures. In the economy pain is the signal for saving money. But now, in the Age of Pain Free, people turn to government. They do not take things upon themselves. After all, in most developed countries they have the social safety net. Yet they are less and less able to cope as government loads more and more onto the backs of the producers.

When President Mubarak said that “almost nobody repays debts anymore” he was admitting that the international financial system is a sham. It will not be long before everyone sees the truth of this.  


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