[Original Date of Posting: January 26th 2011]
We are hearing a lot at the moment about the reducing the government's deficit and the national debt. At the heart of this is a moral and ethical problem: excessive borrowing and spending builds up the burden and cost on future generations, in terms of the repayments and interest payments that build up.
Borrowing and consumption could be seen as the opposites of saving and conservation; whether that be conserving economic or natural resources. In our culture of consumption, many people have the urge to use their credit card to buy a bigger TV's or cars, or borrow more to buy a larger home. What is the impact on the world's resources of this consumption driven by debt? It has now become so easy to buy items, like mobiles, that will be thrown away after a short time. In fact many items are not 'built-to-last' but are actually built with 'inbuilt obsolescence' which encourages us to buy more!
We have a situation where we are rapidly using up many natural resources, with barely a thought for future generations who may have to suffer the repercussions. Once we have used up most of the oil; what then? Will we still be able to make cheap plastics for food storage and pharmaceuticals? When we have used up the earth’s phosphorus, can we easily make the fertilisers that we use for crops? What about when we can only find exotic animals in zoos, since we have destroyed their natural habitat? It is possible that future generations (if they exist at all) will be extremely angry about the lost opportunities that have been taken from them.
Therefore debt is much like unsustainable consumption; it is effectively stealing from the future. When politicians enter massive debt to provide services or infrastructure for the populace, if they do not do this in an economically sustainable way, they are simply deferring problems for the future. When banks started creating toxic debt to help home-owners gain excessive mortgages, we ended up with the financial crisis. Our economic calculations must look further into the long-term, and be more prudent. For example, if bee populations around the world collapse because farming with pesticides appears “cheaper” than organic farming, we could end up with a situation where one third of the food we eat cannot be pollinated! The network Avaaz recently launched a petition highlighting this
‘Global Bee Emergency’.
Proudhon once said: “property is theft” but perhaps also “debt is slavery”. Once you are in debt, you have no choice but to attempt to repay, and you can be drawn into a spiral of debt where you lose your will to be sensible. For instance, in the debate about student loans in the UK, we have not fully considered the mental pressure upon students who will forced to shoulder the burden of repayments for many years. Students may be sucked into a system which reduces their ability to pursue alternative or lowly-paid careers.
In terms of energy resources, we are rapidly burning up the finite fuels that fuel our whole economy. Solar and wind power may appear “expensive” today; but not if you look further into the future. If you build renewable power, at some point in the future you will still have that power source and it will become cheaper as we learn how to improve it. Whereas if you build a gas or coal power station, at some point, that source will run out.
China, India and other rapidly-growing Asian countries have some of the highest rates of personal savings in the world. In fact, China has a high level of saving in government, as well as households and business savings. Some have argued this culture of saving helps with resilience in the long-term. By contrast, the US now has one of the highest levels of household debt. It seems sensible to encourage saving, which increases resilience to the economic and environmental challenges ahead.
This is not to say that all debt and credit is bad. If lending is well-managed it can help people access opportunities they otherwise would not be able to; but they have to be able to pay off their debt eventually! Microcredit institutions such as the micro-loans in Bangladesh, set up by Nobel-prize winner Mohammed Yunus, can be an immense help for poor people. However, these institutions need to be fair and not become “loan sharks”.
The essence of the problem is consideration of fairness and equity, rather than a problem with credit itself; it is question of morals, not money. Yet the world of politics has hardly connected the dots between issues of ecological and financial debt - the IPCC (Intergovernmental Panel on Climate Change) does not mention the issue of debt and environmental damage. Moreover, the international economic institutions, the IMF and WTO, hardly consider environmental issues or inter-generational equity. We urgently need more intelligent harmonisation of policy.
If politicians want to cut the deficit, what about cutting spending on environmentally damaging activities, as well as improving efficiency? Governments are spending on fossil fuel subsidies amounting to $700Bn per year globally according to the International Energy Agency (IEA), as well as subsidies for intensive agriculture which amount to 39Bn Euros per year in the EU alone! Cutting the deficit may be possible without cutting important public services, but instead by cutting the wasteful spending that damages those in the future. Ultimately, the cost of profligacy can be financial and environmental ruin.