Two Kinds of Debts

File:Lacanja burn.JPG

A lot is written today about debts of governments. I want to make a short note on this topic (not referring to any particular state or government, but to all of them). 1)

I suggest that when we think about public debts, we start to distinguish between two types of debts.

Exploitative Debts

On one side are exploitative debts. Governments have financed some things that are short-lived and of no use to future generations. This includes debts made to bail out private banks in the wake of what is called the “financial crisis”. I call these debts exploitative because if we inherit them to future generations that means we are living at the expense of future people. Our governments take credits, spend money for things we or some of us are benefitting from and then pass on the credits to future people who get nothing but the debts. That is exploitation. It is an example of what I have called trans-temporal exploitation. It is ethically unacceptable. It would be a crime.

A common idea is that economic growth will take care of these debts, that they will never have to be paid back because the economy and hence the state’s income will grow so much that they can be neglected. It is important to understand that this is wrong. On a finite planet like ours, there is a very real limit to economic growth. Crossing that limit will lead to disaster. We are almost there. Economic growth is not the solution, it is the problem.

Instead, this exploitative part of our government’s debts must be completely paid within the lifetime of our generation. Everybody should contribute to this according to their financial capability. This means that rich people would have to part with some of their riches. This would be justified because if taxes had been high enough for governments to pay for all those things without taking credit, the exploitation of future people would not have arisen in the first place. As a result, the rich would not have become so rich. So they became richer by a legal situation that enabled them to pay less tax and forced governments to take credit instead. With other words, they became richer than they should be by exploiting future people. This should be corrected. Therefore, a special tax should be raised, depending on property and income, to pay back the exploitative part of the debts within a limited time (say: up to 30 years). The largest share of this money will have to come from the rich (who will still be rich afterwards).

Sustainability Debts

Another part of the debts is non-exploitative because it is used to finance things that give an advantage to future people. Let me call it sustainability debt (suggestions for a better term are welcome – I am looking for a term that makes clear that this is entirely different  from the exploitative part of the debts). Future people will have to pay but they would get something in return (see Trading with the Future). This would include public credits for things like:

  • Preservation of ecosystems and biodiversity (e.g. by buying up ecosystems and fishing rights)
  • Preservation and creation of cultural heritage
  • Creating a sustainable energy infrastructure
  • Buying fossil fuels and mining rights for them in order not to burn them
  • Buying raw materials that would otherwise be used up (raising the price up to the level where recycling becomes economical)
  • Cleaning up environmental damage
  • Scientific research (producing knowledge that can be inherited to and used by future generations)

I think that it is justified to let future people take a share in the costs of such things because they are in their interest. I see a great necessity to invest heavily into these and similar things in order to convert our civilization into something sustainable.


For such purposes, credit should not be limited at all and we should not hesitate to let our central banks create as much money as is necessary to do so. For this purpose, the laws defining the central banks should be changed for this purpose. This would lead to a certain degree of inflation. Specifically, unsustainable things (like burning of fossil fuels) would become more expensive until they are no longer economical), but this is necessary, even desirable. The alternative would be the destruction of our planet.

So our governments and legislators should not try to limit or reduce debts in general. Instead, they should reduce the exploitative debts down to zero and raise the sustainability debts to whatever level is necessary, spreading the costs over many generations.

In a first step, the total non-financial assets of states, i.e. all the things that will be given to the next generation, may be valued. This defines how much debts the government can have. New debts are permissible if they are used to buy or create values passed to future generations.


Note that I have discussed related ideas before on this blog in the semi-fictitious article Saving the World with a Time Machine.

The picture is from

1) This is a slightly revised version of an article first published on The Asifoscope.



  1. Reblogged this on The Asifoscope and commented:

    A revised version of a previous article.

  2. This article came out a little bit long. I will try to present the different ideas in separate shorter follow-up-articles and to elaborate on them, to make the whole thing more digestable 🙂

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: