Adam Smith was not against personal debt, as he wrote in his Wealth of Nations, that the industrious person should put to work all of their financial resources, whether borrowed or their own, to increase their own personal wealth. But he was against national debt, as we all should be,
“He cleared the fog about national debt, which isn’t a Keynesian stimulus to the economy or a Milton Friedmanish drag upon same, but a moral outrage. It allows government to indulge in sneaking:
‘Every new tax is immediately felt more or less by the people. It occasions always some murmur, and meets with some opposition. … Debt is not immediately felt by the people, and occasions neither murmur nor complaint.’
‘When national debts have once been accumulated to a certain degree, there is scarce,l believe, a single instance of their having been fairly and completely paid.’
And counterfeiting. Because the devaluation of currency that results from such defaults should properly be called…
‘an injustice of treacherous fraud.’
This inevitably leads to inflation, which…
‘…occasions a general and most pernicious subversion of the fortunes of private people; enriching in most cases the idle and profuse debtor at the expence of the industrious and frugal creditor.’[i]”
I believe it was Michael Hudson who said that debts than cannot be paid, will not and should not be paid. National debt often falls into this category.
I find it interesting that Smith saw clearly how bad national debt was in the long term for nations. We are living through an extended period of indebted government in Australia right now, and the result has been the massive inflation of the economy. There are some other factors involved, like the war in Ukraine, supply chain issues, and things like this. But the core issue is how much money the government has thrown on the economy in recent years, and also before that.
The result of this has been to make the cost of living astronomical for the average Australian. Which is more than ironic, because much of the money that was poured on the economy was justified to help make life more affordable for the average Aussie. But it has had the opposite effect, in a very short order.
I remember having a discussion with someone in 2020 about the record jobkeeper (welfare) payments that were handed out so Australia could indulge in some of the most Orwellian lockdowns in the world outside of China, for the next 18 months or more from then. I mentioned to this person how immoral and damaging this money would be. He responded, “Would you rather I lose my job.” I replied, “This money is going to make life harder for all of us.” I sometimes wonder what he is now thinking, with the cost of living being so far above what it was just three years ago?
National debt is a moral outrage, but a population that believes you can just keep adding to your debt again and again, is in no place to see how bad this is for all of us when governments do likewise and worse. Many people still are not aware that it is the government’s borrowing that has caused much of this inflation, mostly because the government is dedicated to making sure people don’t work this out. They simply distract people with the offer of more potential welfare, and other niche political issues.
Government debt should be banned, outright. Governments, and as a corollary nations, should not be allowed to impoverish future generations to solve the issues of today. Rather, they should be under the mandate to increase productivity to increase the pool of money and resources from which the nation can withdraw to solve their issues. Otherwise, governments can simply become lazy and borrow money they do not intend to pay back, to kick issues down the road that hopefully somebody else will be blamed for.
Good to see Smith was on the same page on this.
Matthew Littlefield writes to think through some of the current issues facing society, the Church and whatever else comes to mind that might be interesting to process. Matt's focus is usually historical or scriptural, though he will address current issues from time to time as well. He is a co-author of The Ezekiel Declaration and the book, Defending Conscience, How Baptists reminded the Church to defy tyranny. He blogs most days at YoungGospelMinister.blogspot.com.
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