Can We Keep Our Promises?
DEBT AS A PERCENTAGE OF GDP
|Country ||Gross Debt ||Unfunded Pension Liability in 1990 ||Total
GDP is the abbreviation of "Gross Domestic Product", the total sum of all goods and services
sold within a country during a calendar year. Having debts equal 346% of GDP, as in the case
of Canada, presents extreme danger. If the debts were fully acknowledged and interest paid
on them, say at 10% a year, the interest payments ALONE are equal to 34.6% (or about 1/3)
of all that Canada produces. Is there any room left for doing any of the following?
Debts of these sizes can be a no-growth, no-future trap. Historically, countries in these
traps have engaged in catastrophic and irrational behavior---such as inflating the currency
so that money (and debts expressed as money) become worthless. That "solution" destroys
all faith in the society, and produces crises of another sort! The most famous example is
the rise of Hitler in Germany in the 1930's after Germany tried to inflate away its debts in
the 1920's. Tens of millions of people died as a consequence of that "solution"!
- Educating the young, so that they can produce more (and have higher incomes) as adults?
- Re-educating older workers, so that they can continue to earn good incomes in a rapidly
- Building the necessary roads, bridges, airports, fibre-optic cable networks, computer
systems, etc. that will increase the profitable possibilities for economic growth?
The above chart is provided by Lester C. Thurow in "The Future of Capitalism", page 102
to learn more about this book).
It can also be found in "The Economist" of July 8, 1995, p. 115. The original source of
the data is OECD.