Borrowing From OUR Future (a follow-up to “Are we luring migrants to their deaths?”)

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bad debtRecently, my fellow contributor David Hiscox wrote about the link between the expansion of social services and increasing national debt.

As I read over his article linking paying for social services with deficit spending, and the deaths of boat people at sea, I found myself wondering if the implications of his opening question, “If the governments of third world countries can’t spend money on social services because they don’t have the money, how is it moral for the governments of first world countries to spend money they don’t have on social services?” – could be pushed a little further.

Travel with me for a moment into a prototypical world where there is a country-X who has borrowed money from a country-Y. Now country-X also has a several decades long history of borrowing money, and acquiring debts which they are failing to pay back.
How would we (as citizens of country-X, country-Y, or a third country-Z) feel about this? I imagine that we would have two main responses:
1) We would be concerned for country-Y’s long-term economy. We do not know the economic stability of country-Y, and it may well face hardship if country-X cannot meet their commitments.
2) We would be critical of country-X for making such an unrealistic offer, and keen to see them get their present debts in order (even if this is a long-term plan) instead of perpetually robbing-Peter-to-pay-Paul.

An important point here, is that this argument holds whether or not country-X genuinely intends to pay the money back. The point stands either way: If a country has a history of not clearing their debts, then we would be rightly sceptical of them taking out more loans.

And, coming back to David’s point about the legitimacy of social security paid through deficit spending, here lies a valuable insight into why Labor & the Greens have continually been reminding us that our current level of debt is not a genuine concern – saying, “But we have a triple-A credit rating!”

The message here is that we are not like country-X, in short, it’s okay for Australia to keep borrowing money to fund unsustainable levels of public spending and social security (at least for a bit longer!) because our reputation is still good compared with other countries.

This is seductive language, and may sound initially sensible, but unfortunately for those of us in Gen-Y and younger who (if this approach continues) will be saddled with more debt than any generation before us, it’s also a category mistake.
One’s reputation regarding one’s actions compared to others’ actions, can only give you a relative and potentially unstable gauge on those actions, it is not a reliable guide to the ethics or sensibility of those actions. And (particularly relevant to our Australian context), if it is a reputation relative to the highly-questionable actions of others (Greece is a current case in point) – such a gauge will actually be highly misleading.

Put simply, just because there are other countries that are foolishly ‘borrowing from their future’ and choosing to cripple younger generations by unsustainable levels of spending in the present, does not mean that it is ethical or sensible for us to do the same. It is unpopular to state that current spending is unsustainable and it takes genuine self-discipline to reject unrealistic levels of governmental support. But young people must have the confidence to take the long-term view and speak up now – because it is not just the country-Y’s (countries to whom we owe money) that will suffer when we struggle to meet our commitments – but us because they are, quite literally, BORROWING FROM OUR FUTURE.

  • Chooie

    I propose that we rename mortgages to borrowing from your families future. My point being that debt is a tool. Its how you use it that is important. If governments can use debt to make the future better for its citizens then they should do so. If governments are taking on long-term debt with only a vision for the next election or two, that’s when it becomes a problem.

    • Thanks Chooie, Purely for reasons of brevity I didn’t discuss the question of “good” or “bad” debt here (But I hope the point is intimated by my choice of image!).
      I quite agree that there are times to take out a loan – for example in the case of a large national infrastructure project which will see solid long-term returns.
      However, that loan would still be ethically questionable if we lacked the discipline or ability to pay it back.
      You also touch on the issue of taking a short-term election-cycle approach to spending – most definitely a concern in of itself.

  • Konstantin

    It is excellent observation. I saw through this text primarily Greece. And much as the Greeks are to blame, and they are because they borrowed at the peak of the global recession, continued with the social grants and lived like that “around them” nothing’s happening, on the other hand, those who allowed borrowing are also guilty, because it is clear that Greece, even if sold Peloponnese, will not be able to repay the debt, which will be about 500 billion dollars. Even Tsipras or the communist government will not help them in that.

    • Konstantin, you make a fair point – in my alphabet-world country-Y would have have to bear the brunt of entering into that agreement (presuming that the agreement was freely entered into).
      If country-X’s pattern was well-established, we would be right to view country-Y’s investment as at least foolhardy and perhaps down-right irresponsible.

  • The question Chooie and Claire raise about borrowing with only the next election in mind gets to the very heart of the matter. It would appear that this has become standard practice, on the left, an acceptance that they will drive their country further into debt, in order to buy votes they need to stay in office, and drive the country further into debt.

  • Konstantin

    One more thing here is not so clear to me. Why voters of some states, primarily I’m referring to Greece, Spain and perhaps Turkey in the near future? Countries that are struggling with finances in general and with economic integration think that from the crisis can save them ultra left-wing government? Ultra socialists or “soft” communists, even if change something, it will lead this countries in greater debt or the isolation, economic or other

  • gowest

    The latest interest rate is around 2 % – the lowest its been. Logically the government should borrow more to retire the old debt at higher interest rates. In fact they should borrow as much low interest rate funds as they need to boost the economy as well.
    In my view the govt lacks vision – they need huge projects like the snowy. My favorite is a north south canal to flood lake Eyre with seawater and make it an inland lake dividing the continent in two. Imagine the real estate boom with all that new sea frontage. Imagine the change in weather patterns.