There comes a time in the life of a nation when the national debt has attained such a high level, the public begins to speak in a language that means to say the current generation is stealing from future generations. The people complain that to please the electorate, the political and economic captains of the country are laying a foundation that will burden their children and grandchildren with a debt so large that future generations will have a lower standard of living than the current one. This will happen, they say, because those generations will be paying for the consumption that the current generation is enjoying and paying for with the money it borrows from the future. When a debating climate of this sort takes hold, a proposed borrowing of any kind, whether legitimate or not, is then automatically rejected by the public because it is argued that borrowing will add to the debt and will make matters worse. Well, I intend to show that while this is generally true, there are occasions when it may not be so true.
Of course, there is already a counter-argument which says that if you borrow to spend on infrastructure, you borrow from the future to build for the future, and this can only be a good thing because in so doing, you relieve future generations from having to do what you do now thus free them to do other things. But I intend to go beyond this and show that in some cases, even when you borrow to increase your current consumption, you can still be doing something good for future generations. The reason I came to develop this view is that I spent my teen years between the ages of 14 and 17 reading and writing about the conventional wisdom which said then as it does now that it is a virtue for the current generation to sacrifice and save so that future generations may have a better life. This is what good parents do to secure a good future for their children, and this is what a society must do to secure a better life for future generations. But then I witnessed the unfolding of a few events in the world that made me wonder if this were not too simple a view of the subject. And so I started to review all the things that I learned and all the things that I experienced in this matter.
In my teen years I red books and articles, and I wrote school essays and papers, all revolving around the idea of making a virtue of avoiding the burden of debt unless you have no alternative but to borrow to stay alive. Parallel with this, we were taught in school and taught by the media everything we needed to know about conserving the non renewable resources that the country possesses so as to leave something for future generations. This happened in Egypt, an ancient country that was nevertheless at the forefront of the Industrial Revolution about two centuries ago alongside Britain where the Revolution began with the invention of the railway and the mechanization of the means to produce textile, both resulting from the adaptation of the steam engine. In fact, Egypt became the second country in history to have a railway and, relying on the reputation of its famous cotton, it also became an important center for the production of textile. But then the country was held back because of a regrettable series of events among which was a heavy debt load that burdened the treasury. From this point on, things went from bad to worse for that country and the rest is history like the saying goes.
As fate would have it, I came to Canada as a young adult in the Nineteen Sixties and was exposed to a history that may be considered antithetical to what I learned in my teen years in Egypt. In fact, not only was I exposed to Canada's history, I lived that history for a period of time that spanned nearly half a century which is a long time considering the young age of my adopted country. What I lived through was a history that made me and many of my compatriots uneasy about the extent to which Canadian industries, especially the resource industries, were owned by foreigners. We also worried about the wholesale exploitation of those resources, believing that Canada will be depleted of them and will be hollowed out by the end of the Twentieth Century. Many people predicted that Canada will be a ghost town from sea to sea to sea before the start of the Twenty First Century except for a narrow strip of settlements that will survive alongside the border with the United States. But here is Canada ten years into the new century doing very well indeed, having withstood the near collapse of the world economic system better than many countries including the United States, countries that now look upon us as a model of good management.
Much has happened in the world between my teen years and the first decade of the Twenty First century. And it was during this period that I went through several revisions in my thinking with regard to the questions that relate to both the use of natural resources and the borrowing of money by the state and by individuals. More recently, I saw what happened to the nations in Asia and South America that did not heed the lessons of the conventional wisdom as these countries suffered the consequences of their profligacy. I also saw what happened to the peripheral nations of Europe as they too burdened themselves with too much debt. Each of these episodes caused me to try and square what I was seeing in Canada where borrowing by the state and by individuals was a routine kind of business and never a subject for discussion -- except by the academics and some media types -- and what I was seeing overseas. Many questions in this regard still haunt me today because I have not found a definitive answer to them. But a few things have happened that helped me formulate a more elaborate view of the subject which I am still in the process of crystallizing. Feeding this view are the events I see unfold in several places around the world, among them Egypt, the place where my ideas on the subject began to take root in the first place.
Up to now the view of the conventionalists, myself included, had been that society is made of generations, each one following the other and where every generation inherits the world from the one that preceded it. This view came about because of the fact that society is made of families where the breadwinners are the children of their parents as well as the parents of their children. We see a clear demarcation line between the generations, and this makes it so that when we think of society as a whole, we imagine a train that is made of boxcars each representing a generation that is distinct and separate from the others. Thus, the generation that borrows money today leaves the paying of the debt to the generations down the railway track, and the generation that sells the resources of the nation today leaves nothing for the generations down the railway track. But this image is beginning to change in my newly developed view of the subject as I see the situation a little differently now. Below is a description of this new image, and it helps to have a little imagination to better visualize it. Brace yourself.
Here is what I see: Let us assume that the average productive life of an individual is the round figure of 20,000 days which is more or less correct. Some quarter of a million babies will be born in the world today as they did yesterday and will be tomorrow and the day after and so on. Also, roughly this many people will reach the age when they start to be productive for their societies. Something like 2,500 or 3,000 of those will enter the workforce in Egypt every day or will stay at home and be productive in their own way. Let us now visualize this number of people forming a string. Tomorrow, another batch of people of about the same number will enter their productive life, and they too will form a string. Things go on like that day after day to form something like 60,000 strings in 60,000 days, the span of 3 human productive lives. Now think of these strings lying beside each other as in a tapestry that is pulled ahead by time. As this happens, a new string is added each day at one side of the tapestry because new babies are born, while an older string falls off at the other side of the tapestry because people retire or die. Of course, some people die prematurely but this only results in the string to which they belong thinning out slightly but not perishing entirely. Thus, unlike the discrete boxcars that follow one another, the strings cohabit the same space at the same time therefore have the opportunity to interact with each other for a period of time that can span as much as 3 generations.
In fact, these strings are not inanimate matter; they are biological entities born in the shape of human beings. As such they have a culture that is always in the process of evolving. They are human beings that walk, talk, imagine, feel, sing, dance, create signals, send vibes and so on. In short they change their environment and communicate the changes to each other. And this is what alters, mutates, transforms and evolves the culture. And because the new strings of youngsters grow up in this environment, they pick up the vibes and become part of the culture which they help to evolve in turn. And this is what plays a major if a subtle role in the economic development of the nation. To see how this happens, we imagine two underdeveloped societies. For some reason one society industrializes at a quick pace and the other does not. Three generations later the two societies decide to merge into one. You can think, for example, of the two Germanys that did merge after the fall of the communist regimes, or the two Koreas that may decide to merge one day. Which society do you think will be better prepared, therefore have the advantage, when it comes to competing for the best jobs and the higher salaries? No doubt the group whose great grandparents started to develop decades ago will be better prepared for the new world, therefore have an advantage over the other.
We must conclude from the preceding that yes, in doing what it did, the generation of the great grandparents improved the lives of its contemporaries but it also forged the new industrial culture which it transmitted to the younger generations down the line. It was possible for this to happen because the lives of the generations overlapped for a while. And this is how the current generation was given the tools by which to develop an advantage over its counterpart, the less developed society that remained relatively less developed. We can see, therefore, that the borrowing of money and the use of the resources that was done by the great grandparents was not something that benefited only them; it was something that helped to create an invisible benefit we may call “industrial legacy” that was left for the descendants to inherit. Yes, the descendants may have to pay the debt that was run up by the great grandparents but they are getting something in return. And yes, they may not have as much resources to work with as the older generation but they have the legacy and the tools that will help them invent ways to discover new resources and recycle old ones.
When we apply this lesson to what is happening in Egypt at this time -- which is not different from what is happening in China, India or Brazil -- we can see that the rapid industrialization of Egypt and those other countries will have a positive effect on future generations even if the current one borrows and spends on itself what will be paid for in the future. But while it is easy to leap to this conclusion with regard to the countries that have a large agrarian society on its way to becoming industrialized, it is somewhat harder to draw the same conclusion with regard to the nations that are already industrialized and have a sizeable debt to contend with.
If these people continue to borrow to maintain the high standard of living to which they have been accustomed but do little else with the money, the riddle that must be solved is encapsulated in this question: How may an industrial society develop a useful new legacy that can be transmitted to future generations so as to benefit them while they pay off the debt that was run up by the current generation?
I am still thinking.