Can We Keep Our Promises?

DEBT AS A PERCENTAGE OF GDP
Country Gross Debt Unfunded Pension Liability in 1990 Total
United States8566151
Japan79218297
Italy123233356
Germany53160213
France56216272
Canada96250346
United Kingdom52186238
Belgium142165307

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?

  • 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 changing economy?
  • Building the necessary roads, bridges, airports, fibre-optic cable networks, computer systems, etc. that will increase the profitable possibilities for economic growth?
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"!

The above chart is provided by Lester C. Thurow in "The Future of Capitalism", page 102 (click here 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.

Citizenship
Main Page