25th June 2012
Debt now stands at over 66 per cent of Britain's gross domestic product.
It's possible to view the relentless march of the country's crushing debt on the Taxpayers' Alliance UK debt clock, which ticks up at breakneck speed.
Some hope that austerity measures will be effective at tackling this, or on the other side of the fence that we will manage to grow ourselves out of this hole.
Speaking at the Reith Lectures, economic historian Niall Ferguson argued that the "young should welcome austerity," adding they "find it quite hard to compute their own long-term economic interests." In other words, the future burden on them will be reduced if they swallow austerity measures now.
However, even if the young embrace austerity, isn't it generations far into the future that will bear the burden of the financial crisis of our time?
Ferguson writes in the Daily Telegraph: "These mind-boggling numbers represent nothing less than a vast claim by the generation currently retired or about to retire on their children and grandchildren, who are obligated by current law to find the money in the future, by submitting either to substantial increases in taxation or to drastic cuts in other forms of public expenditure."
Leaving_these_shores comments: "We have mortgaged the future of our children and grandchildren. Unfortunately the older generation is not prepared to do anything about it. They are the recipients of the fruits of the mortgaging and the kids are going to have to deal with the repayments…As my name suggests I'm not staying, I'm not prepared to bequeath these massive debts to my children. We're going to see a big drain of young people from this country, and who can blame them."
The intergenerational social contract
Psyfi blog says, writing to a fictionary ‘grandchild': "Under this contract I, and my generation, have paid for our parents' and grandparents' social benefits and pensions. You, in turn, are expected to pay for ours. The problem, of course, comes because we've run up a ton of debt, eaten all the fish and melted the polar ice caps by using up all the oil along the way. In fact, arguably, we've broken the contract by borrowing money to pay for our side of the bargain which you'll have to repay, rather than paying for it ourselves."
But perhaps it's worth remembering that future generations will inherit from us not only the government's debts, but the enormous wealth that has been accumulated over the ages.
As City am argues: "Consider a child born in London today. She comes into a world already stocked with roads, ports, houses, hospitals and so on and on and on. She inherits valuable institutions, such as the rule of law, that took centuries to develop. And, most importantly, she enters a world filled with scientific knowledge that will make her life far better than it would have been only 100 years ago."
After all, in some senses being born any time since the industrial revolution is a windfall gain.
Those who talk about our obligations to future generation typically get things the wrong way around. Being born in 1970 rather than 1870 was good luck. Being born in 2070 rather than 1970 is also likely to be good luck.
"Making sacrifices for the sake of future generations would transfer wealth from the less fortunate to the more fortunate," concludes City am. Debt among future generations, according to this argument, does not exist.
But let's not forget the debt of climate change. Psyfi blog adds: "We may be laying down debt for you to repay, using up irreplaceable fossil fuels and over-exploiting renewable resources but we can console ourselves with the thought that you'll be far richer than us.
"Only, of course, we don't know that. Global economic growth only took off about 200 years ago and we can't guarantee that it will continue, especially if we destroy capital stocks with debt and wreak environmental damage with our high carbon lifestyles. Still, if it all goes wrong it won't be our problem…"
What do you think? Is seeing the debt as an issue between generations wrong? And if so, why? What do you think of the idea that future generations will be stuck with some huge tab in the form of the national debt, or climate change?
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