Although all of this is set out in the white paper, I thought it would help to go through parts of it and see if you agree.
So the starting point is that debt is a bad thing – not just for individuals but also for countries and ultimately the world as a whole.
Lets start with countries and I have highlighted Highly Indebted Poor Countries (HIPC) and also Highly Indebted Rich Countries (HIRC); but there may be other countries where debt is a problem – China for example is laden with debt – money owed to its citizens, rather than by it – and it seems that may be stifling its economy.
The Jubilee Debt Campaign and associated organisations have been campaigning since the mid 1990s to get debt waived for countries who are paying so much in debt repayments that they cannot afford basic services such as health care and education. Many of the debts themselves have been categorised as “unfair” because of the way they were incurred either on the lifestyle of the country’s leader or on “vanity projects” which whilst they exist were not a high priority for the country (such as palaces and infrastructure).
This sort of debt is a bad thing and the world has agreed to waive debt after agreeing suitable criteria for determining whether it is right to waive the debt.
The question is whether that is sufficient reason for outlawing all debt or whether an alternative solution would mean we can avoid these sorts of bad debts in the future. My argument is that when added to the debts of impoverished rich countries and what happens when personal debt becomes national debt that we cannot manage debt well enough and the right answer is to outlaw it all.
I have just listened to a BBC analysis program (which is available on iplayer and as a podcast). If you listen you may like to open the BBC News page advertising this, if only for the cartoon which illustrates the “Minsky moment” when an economy goes into freefall.
From the program it appears that economics is going to be taught differently in future. One of the fundamentals of classical economics was that a system would reach an equillibrium state and therefore we could rely on markets to move towards and then stay in a steady position. Minsky’s thinking “Stability is destabilising” is now being introduced into economic textbooks and thinking. This says, amongst other things, that we cannot trust the market to give us stability and we need to do something to manage any build up of debt.
The BBC article explains the theory in more detail but does seem to reflect what actually happened in financial markets quite closely with banks producing inherently riskier mortgage products during the years of apparent stability leading up to the 2008 crash.
It has inspired me to add a few more books to my bookshelf and see if I can get my head around Minsky’s thinking.
But I think it also adds to my argument that we do need to intervene to manage debt in the world. Economists will argue for controlling debt, I am suggesting that we might be better banning debt altogether.
As the first post on this new blog, I thought I would try and set out what I am trying to do.
I have been worrying about debt (personal debt problems and the global debt crisis) for a number of years and wanted to see if there was something that could be done about it. I even tried reading a few economics texts.
As a result I started to think that debt was a bad idea. Whilst I am not opposed to the idea of debt in principle, we just dont seem to be able to handle it. And then it becomes a problem and the problem becomes a crisis.
So can we live without debt?
I have started writing a paper which tries to address the issues that a debt-free society would face. I am not clever enough to have all the answers and some of my answers may not be practical.
So that is why I am starting this blog – can you help by helping me look at the issue and whether we can change the world!