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.’
And larceny:
‘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.
[i]
Smith in P.J. Marsh 2007, On The Wealth of Nations, Grove Press. p150.
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