I just read the Vierte Berliner Rede (4th Berlin speech) of the German Federal President Horst Köhler. It answered some of my questions regarding global economic foundations and principles of function, but only some. I’ll elaborate here on some stuff that I got inspired to when reading that speech.
Köhler said that all industrial nations where national debt increased in times of increasing welfare are nations where all the people lived beyond their means. He called national debt a draft on the future: something that has to be paid back by future generations. (And I would add: either by state bankruptcy with its negative bye-effects on economy, by inflation or by indeed paying the debts.) Köhler gave a cool and simple explanation of what national debt means. But to me, at least one question remains:
Calling national debt a draft on the future hides the fact that this money got distributed as salaries in the whole nation. The naive judgment would be that people profited from national debt by either getting the stuff the state bought (streets, schools, unemployment benefit, …) and / or salary for working for the state.
A basic creed of our economic system is: the needs of man are infinite, but the means to fulfill them are finite. That should be rather: the greed of man is infinite, and the means to fulfill his greed are finite. But the needs of man are finite, and the means to fulfill his needs are infinite. How that? Because the world is full of ever-renewing resources like fresh water, wood, energy from the sun etc.. These resources are enough to give a mankind of limited size what it needs, for all eternity long (i.e. at least 5 billion years, as our sun will last as long).
Need is a wish that’s justified, while greed is a wish that is not objectively justified. Wanting water, food, protection, social community, a nice workplace and health is justified, as this is what human nature needs. Nature can afford all this for us all, and even adds bonus on top of that. As nature is made by a God who gives freely and richly to all. But wanting to be mightier than all other people, or to own a luxury ship, or to jet around the world all life long is greed: it’s motivated by a defective mind in the sense that it lacks something very basic (some say, God) that it tries to cover up by materialism. In terms of need, greed can be recognized by the fact that somebody owns something that he cannot peruse: a billionaire can never use his ship to the extent that a travel business can use theirs. The sad thing here is: potential welfare is lost here, as it’s lost wherever a resource is not used to its full potential, that is, wherever something is bought that is not needed. That way, greed takes the resources that other people on the planet need (and causes poverty), and that future generations need (as in the case of oil, coal etc.). Put another way round, greed can be recognized by the fact that nature could not provide this stuff to all people. Luxury is not necessarily greed, as I said above that nature adds a bonus. But wanting excessive luxury, on the cost of the current and future generations, is greed.
Now, back to the national debts and the financial crisis. The problem is that both the state and individuals were able to utilize the money system to fulfill their greed. That’s possible because of credits (as a general option, or, because of way too much volume for credits). A credit means that money can go where it does not fulfill people’s needs, just because it fulfills the business owners’ and / or money owners’ greed by means of the rate of return. With every share of an automotive business, shareholder accepted over-production just because they got their rate of return.
Put another way round, credits increase the speed of economy. Without credits (or with credits only for very special cases), the speed would be way slower: companies would have to be in business for decades and save money before they can build their own building. But every company that is in business while having debts did increase the speed of economy beyond what’s sound and healthy. Unhealthy speed means “freedom without personal responsibility” (to use Köhler’s words), and this is enabled by credits. Now, we need to ask, if money is just a means of value exchange, who did give the credits to companies, and that way enabled them to build up an unhealthy economy that fulfills our greed (but not even our needs, e.g. our social needs, because we work way too much). The answer: in industrial nations, the value comes from the millions of small and big investors, of people like you and me, who deposit their money at a bank, in shares or in a fund, to gain from the rate of return. These people allowed others the freedom to use their money without any responsibility, i.e. they gave the might that’s associated with money away, which led others to concentrate that might by means of credits!
So, basically, the economy’s crisis is the fault of a greedy public. People wanted a rate of return just for their money, without being personally responsible for what’s done with the money. They were too lazy to move its ass for a rate of return. Ok, many have worked for the money they saved (ironically, in a company that probably lives on credits itself). But the next step would have been to found an own zero-debt business that ethically tries to fulfill the need of people, and refuses to fulfill greed.