Debt ist Good – Debt is Bad ?

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Contribution to CSD’s project 01: A Healthy Planet for Future Generations, Human Rights and Sustainable Development – Obstacles to progress in the present world economic system: High public debt in many countries. 

On the subject of public debt, many known economists have different opinions and want to clean up several errors: (1) high public debt damages the economy, (2) A high level of government debt is the cause of unemployment, (3) A high public debt burdens future generations.

To deal with the subject in depth, the two subject “public debt” and “contracting debt” must be clearly separated to understand the different effects. Until the year 1970, the national debt was small in Austria. Chancellor Bruno Kreisky incurred high debt: but it worked and the economy began to flourish. 45 years later, Austria has a relatively high debt but the incurring debt is relatively low, the result is that the economy gets deeper and deeper into crisis. But even incurring debt (2012) to stimulate the construction industry brought very little. Many economists see a strong correlation between public debt and economic growth. Paul C. Martin, –  not so well known as Paul Krugman – , presents in his book “Die Krisenschaukel (1997) ” his observation: “The higher the government debt increases, the lower was the economic growth. If the growth was below zero, – shrinking of the GDP -, the national debt will rise even faster. The state has to add the interest (in the Greek are high) to the public debt because the taxes can’t be raised in a crisis without exacerbating this even more. Also, the government wants to help (unemployed, etc.!). This economic growth will continue to plop – until finally all are unemployed ” Another effect is that the richer are getting richer earning the dividends of the state as “unearned income”.

Paul Krugman: Debt is Good! –

Public Debt and Economic Growth: Correlation ist not Causation!

See on this subject:

Roland Leithenmayr, VfV