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Jewish World Review
July 5, 2011
/ 3 Tamuz, 5771
Debt: A Moral Issue
By
Paul Johnson
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http://www.JewishWorldReview.com |
I wish people everywhere were encouraged by politicians, the media and their places of worship to see indebtedness in moral as well as economic terms.
There is nothing wrong with borrowing money. It's a natural part of the capitalist system, whereby those who are frugal and have savings are enabled to use them to help those who wish to expand their businesses, receiving reasonable interest on the loans. But if you borrow, three conditions are necessary for your actions to be righteous:
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The money borrowed should be of reasonable size commensurate with your resources and prospects.
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From the outset a program of repayment should be in place.
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The repayment plan should have priority over any other commitment, especially any personal spending plans.
It's obvious these conditions are seldom met today, either by individuals or governments. Indeed, the precondition that the return on the loan should be reasonable is not often met, either. That egregious swindler Bernie Madoff would not have been able to steal so many billions of dollars had wealthy investors--who should have known better--not been seduced by an outrageously high return on capital. But greed dulls the senses. Fraud would be impossible without a blinding love of easy lucre.
However, it's chiefly the failure to observe the three conditions of borrowing that leads to trouble--as was certainly the case in the current world credit crisis.
Borrowing by small countries was absurdly large in relation to their resources. The Irish spent vast and clearly unrepayable sums of borrowed money on houses. In 2006 homes in Dublin were fetching up to 1.7 million euros. But in 2008 the housing bubble burst. As a recent auction showed, many properties are now worth less than 25% of their peak purchase price.
At least the Irish are making genuine attempts to pay back what they owe. On the other hand, the people of Iceland, having borrowed equally recklessly, are getting set to repudiate their debt. I suspect Greece and Portugal may do the same. What's clear is that very few of the heavily indebted countries have any realistic repayment program.
I'd like to relay two edifying stories from the first half of the 19th century.
At the close of 1825 Europe, and Britain in particular, experienced the first modern financial crisis. After a boom came a bust, and one of those caught up in it was the Scottish poet and novelist Sir Walter Scott. To oblige his publisher, Archibald Constable, Scott had lent him money in exchange for shares in the publishing house. When the crash came, Constable went bust. It being the days of unlimited liability, poor Scott was made liable for a huge sum.
Scott might have thrown up his hands in despair or gone bankrupt, too. Instead, he shouldered the burden of repayment and set about working it off. He wrote and wrote until the end of his days, and by his death most of the debt had been repaid. His royalties cleared the remainder a few years later. It was a remarkable lesson in financial probity.
A few years later President Andrew Jackson succeeded in paying off the U.S. public debt--an amazing achievement, unique in the history of Western nations. During the War of 1812 the U.S. debt had jumped from $45 million to $119 million, continuing to grow until Jackson took over. He promised to eliminate the debt, and he did. As of January 1835 the national debt was totally extinguished, and the U.S. Treasury carried a balance of $440,000.
As Jackson's biographer Robert V. Remini wrote: "The elimination of the national debt did not happen simply because the country was prosperous and expanding. It happened because Andrew Jackson was determined to make it happen, and he did everything within his constitutional power to bring it about."
Of course, such solvency didn't last. The Civil War created a debt of $2.2 billion. World War I took the debt to more than $22 billion, with World War II raising it to $260 billion. In 1955 Congress put the debt ceiling at $281 billion, and it has continued to be added to by temporary extension. Under President Obama the debt has taken a tremendous leap upward and shows no sign of being brought under control.
As the richest country in the world the U.S. ought to set a good example. It should outline a program of debt reduction that would bring the total down to precrisis levels in a reasonable period, say, five years. This is certainly possible, given enough willpower. Unfortunately, I see no evidence that Mr. Obama sees the issue as a moral one. To him it's simply a matter of politics and economics. Odd to think that Communist China, officially atheist, is currently setting a better moral example regarding debt than an openly religious, capitalist America.
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Eminent British historian and author Paul Johnson's latest book is "American Presidents Eminent Lives Boxed Set: George Washington, Thomas Jefferson, Ulysses S. Grant". Comment by clicking here.
Previously:
06/08/11: The Moral Logic of Intervention
03/10/11: China's Secret Weakness: Is history repeating itself?
02/10/11: Assessing America's Foes
11/29/10: Wanted: Someone to Trust
10/19/10: Are Universities Worth It?
06/01/10: The English Language and Freedom
04/20/10: Listening and Telling the Truth
02/28/10: There Is No Keynesian Miracle
10/20/09: A Job Waiting for a Woman?
07/21/09: Obama Has to Be World Sheriff
03/24/09: Short works of genius that cheer up the writing profession
02/11/09: What would Darwin do?
01/27/09: Are you sophisticated? Here's how to find out
01/06/09: What did they talk about in the Ice Age? The weather, of course
09/09/08: Time, and our appalling ignorance of it
08/19/08: Eye-stopping glimpses of an exotic and forbidden world
06/30/08: How to fill a lecture hall, and how to empty it
06/23/08: Americans should count their blessings
05/20/08: Pajamas for Presidents
05/13/08: Literary woodlice boring needless holes in biographical bedposts
04/01/08: When markets come crashing down, send for the man with the big red nose
04/01/08: Quality for dinner. Pass the Fairy Liquid, Old Boy
03/25/08: In search of an American President with brains and guts
03/18/08: Technological warfare against mice won't work. Try cats
03/11/08: What is a genius? We use the word frequently but surely, to guard its meaning, we should bestow it seldom
03/03/08: Fiction as a crutch to get one through life
02/26/08: Impatience + Greed = Trouble
02/13/08: Shakespeare, Neo-Platonism and Princess Diana
02/07/08: Where Industry Has Failed Us
12/19/07: People who put their trust in human power delude themselves
12/12/07: What is aggression?
12/04/07: Pursuing success is not enough
11/07/07: Are famous writers accident-prone?
10/31/07: Courage needed to disarm Iran
09/20/07: Who Will Say I Promise to Lay Off?
07/24/07: Greed is safer than power-seeking
04/02/07: Benefactors must be hardheaded
03/07/07: American idealism and realpolitik
11/28/06: Space: Our ticket to survival
10/24/06: Envy is bad economics
10/11/06: Better to Borrow or Lend? Rethinking conventional wisdom
08/22/06: Don't practice legal terrorism
08/08/06: A summer rhapsody for a pedal-bike
08/03/06: Why is there no workable philosophy of music?
07/11/06: Historically speaking, energy crisis is America's opportunity
07/06/06: The misleading dimensions of persons and lives
06/06/06: First editions are not gold
05/23/06: A downright ugly man need never despair of attracting women, even pretty
ones
04/25/06: Was Washington right about political parties?
04/12/06: Let's Have More Babies!
04/05/06: For the love of trains
03/29/06: Lincoln and the Compensation Culture
03/22/06: Bottle-beauties and the globalised blond beast
03/15/06: Europe's utopian hangover
03/08/06: Kindly write on only one side of the paper
02/28/06: Creators versus critics
02/21/06: The Rhino Principle
© 2009, Paul Johnson
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