Friday, 27 January 2012
The end of western civilization
Perhaps I'm naive, but I was expecting a slightly more robust response from the British public when government debt crossed the trillion dollar mark.
I will concede that the muted response could be because big numbers are hard to understand. Maybe if we heard that UK public sector debt amounts to £17,000 worth of debt for every man woman and child in the country. 17,000 quid is something that most of us can appreciate. Do I have that kind of cash to pay off my share of the British debt stock? Do you?
The amount of public indebtedness is alarming, but there's something that worries me more. Over the last four years, UK government borrowed over £400 billion. In other words, public debt is growing at the rate of about £100 billion a year. Again, let's put that number into something more manageable. The British government is borrowing about £2,000 a year per person. Moreover, there are few signs that this rate of debt accumulation is likely to slow any time soon. Sure, the coalition talks a good game. But the scoreline says something quite different. During the last 12 months, the government added £120 billion to the public debt stock. Britain is drowning in debt.
There are some some dismal types who think this debt addiction, which is a European wide phenomenon, signifies the prelude to the collapse of Western civilisation. European economies have no dynamism, no entrepreneurial spirit, and this is why they cannot grow. Europe now emits the mild odour of a graveyard. European governments have to borrow extraordinary amounts of money to keep their decrepit and outdated welfare systems ticking over.
Maybe, that conclusion is a little apocalyptic. Nevertheless, Europe cannot continue on this trajectory. One where another Europe were paid in full for its lax attitude to debt accumulation. As we now see in southern Europe, comes a day when governments can borrow no more. When that happens, the adjustment process is immediate and brutal.