Our viewpoint on national debt is not solely based on economics. Rather our current national debt is the result of our way of thinking. Americans, and to a lesser degree our Western partners are extremely good at converting everything into a $ value. Not only goods and services but also concepts such as pollution, the cost of running a household, psychological issues and more. Within the Western world the priority of those values are assumed to be worldwide. Most economic studies are done in capitalist countries and then extrapolated to all economies.
IN THE SUMMER of 1995, a young graduate student in anthropology at UCLA named Joe Henrich traveled to Peru to carry out some fieldwork among the Machiguenga, an indigenous people who live north of Machu Picchu in the Amazon basin. Here is an excerpt:
Americans, without fully realizing it, were manifesting a psychological tendency shared with people in other industrialized countries that had been refined and handed down through thousands of generations in ever more complex market economies. When people are constantly doing business with strangers, it helps when they have the desire to go out of their way (with a lawsuit, a call to the Better Business Bureau, or a bad Yelp review) when they feel cheated. Because Machiguengan culture had a different history, their gut feeling about what was fair was distinctly their own. In the small-scale societies with a strong culture of gift-giving, yet another conception of fairness prevailed. There, generous financial offers were turned down because people’s minds had been shaped by a cultural norm that taught them that the acceptance of generous gifts brought burdensome obligations. Our economies hadn’t been shaped by our sense of fairness; it was the other way around.
Returning from the Czech Republic in 2009 felt a bit like the above story. I had forgotten how some things were done in California, but life had not stopped there either, so in addition I had to learn the changes as well. The plus side was that I looked at the American culture with other eyes. I could take some distance from it. My son-in-law pointed to the blog of Dr. Housingbubble a year or so before returning to the USA. It is a description of the housing bubble development and how it started in Southern California. I also read the Dutch book: Bankroet (bankrupt) by two financial editors of the NRC Handelsblad (newspaper) Egbert Kaise and Daan van Lent. The writers start with the 1930s depression, then develop the process leading up to the 2007-2008 recession. It mostly deals with what is happening in California but expands to how it affects the rest of the world. The nice part is that they give short explanations of terms commonly used in American articles, but not always understood the same way in Europe.
Another concept to understand is “government deficit.” Below the differences between how Europeans look at it vs. government deficit in the USA.
All 28 EU member states are committed by the paragraphs in the EU Treaty, referred to as the Stability and Growth Pact (SGP), to implement a fiscal policy aiming for the country to stay within the limits on government deficit (3% of GDP) and debt (60% of GDP); and in case of having a debt level above 60% it should each year have a declining trend. wikipedia
In the above graph we can see the deficit as % of GDP for the USA, as compared to the European model as described earlier.
The US debt is about 75% of GDP.
A question for you:
HOW COME THE USA DEFICIT AS A % OF GDP DECREASES, WHILE NATIONAL DEBT INCREASES?