Unacknowledged as key causes of most developed countries’ growing and unsustainable debt is their citizens’ lack of happiness and well being. This induces people to seek immediate comfort in material goods, drugs, and activities and lifestyles that eventually cause them, and their societies, great harm, ill health, and massive debt!
After decades of study, Robert E. Lane, the Eugene Meyer Professor Emeritus of Political Science, at Yale University in the US, found that it is a lack of happiness and well being that is eating away the moral fibre of the populations in advanced market democracies. In Professor Lane’s seminal book, Loss of Happiness in Market Democracies, he writes, “amidst the satisfaction people feel with their material progress, there is a spirit of unhappiness and depression haunting advanced market democracies throughout the world, a spirit that mocks the idea that markets maximise well-being and the eighteenth-century promise of a right to the pursuit of happiness under benign governments of peoples choosing.”
Continuing, “the haunting spirit is manifold: a postwar decline in the United States in people who report themselves happy, a rising tide in all advanced societies of clinical depression and dysphoria [anxiety, malaise], especially among the young; increasing distrust of each other and of political and other institutions, declining belief that the lot of the average man is getting better, a tragic erosion of family solidarity and community integration together with an apparent decline in warm, intimate relations among friends.”
It is these conditions which Professor Lane observes that give rise to individuals seeking immediate comfort anyway they can. Hence, most developed countries’ populations gravitate to instant solutions that might ameliorate their lack of happiness and anxieties. This, no matter the long term monetary, psychological, or physical consequences and costs to themselves or society. Professor Lane believes it is imperative for western democracies to give the highest priority to improving the happiness and well being of its individuals. And this means their focus should be on human psychological health and relationships—not about income levels.
By looking for hedonistic joys in the present, many developed countries’ individuals seek excessive material consumption which then creates unsustainable levels of consumer debt. In the US, though to a lesser degree in other developed countries, consumer debt has grown far faster than individual earnings gains over the past several decades. Despite a respite in consumer debt growth during the past two years, signs are emerging that US consumer debt might well begin to outpace actual earnings gains again in 2011, thereby creating conditions for yet another future financial crisis.
Also, and again much ignored in the debate concerning debt, are other individual behaviours that induce it. For example, to provide a modicum of happiness and to make life more bearable, people in America (and in many developed countries) consume drugs (legally and illegally) in extraordinary amounts. These drugsalcoholic beverages, marijuana, cocaine, cigarettes, prescribed and non-prescribed medications, etc.—often create dependencies that impair health, brain and psychological functioning. These dependencies then lead to greater crime to support drug habits, increase prison populations and criminal/legal costs, raise the number of accidents everywhere, and encourage unhealthy lifestyles that in turn produce epidemics of obesity, diabetes, heart disease and all manner of health problems.
Americans spend more on healthcare, by far, than anyone else. In 2009, according to the Centers of Medicare and Medicaid Services, Americans spent $8,086 per person on healthcare, equal to 17.6 per cent of their economic output or gross domestic product (GDP). And such expenditures continue spiralling 4 to 10 per cent a year, far faster than GDP itself. Thereby they add inexorably to future unfunded US federal government medical liabilities that Boston University’s Professor Laurence Kotlikoff believes is about $125 trillion over an infinite timeframe. To fund that liability would require every man, woman and child in America to pay about $407,000 to the US federal treasury!
And among public companies a short term focus on near term profits that potentially create longer term costs and debt has been endemic. Consider this 2001 quote by Maryann Keller on the US automobile industry. In Forbes magazine, she said, “[That] Chrysler, GM and Ford spent billions of dollars to buy their stock in the open market… It was always obvious that product spending [developing new autos] was being sacrificed to provide trading liquidity [ease of selling stock] for big investors while boosting earnings per share. GM, Ford and the Chrysler Group today [in 2001] find themselves with growing gaps in their product portfolios as they lose market share…”
Thus, the US automobile industry preferred to spend profits on supporting their near term stock prices rather than developing new products for longer term profits. By 2009 all but Ford were bankrupt. After losing tens of thousands of jobs and engaging in a massive automobile industry restructuring program, the US government bailed out the industry (for now?) at a cost of about $85 billion. (Canadian governments also supported GM and Chrysler to the tune of $13.5bn CAD.)
Total societal US debt (private, corporate and government) is now likely to continue moving higher again as consumers are forever encouraged to spend now while saving is discouraged due to artificially mandated low rates. Increasing employment, though welcome, is not likely the answer to mounting unsustainable societal debt. In fact, it might well exacerbate it if former long term trends of debt growth outpacing income gains continue.
The US, like most other developed countries, is on a path to increased human suffering and tragic financial circumstances unless it deals with the fundamental issue: enabling individuals and families to become intrinsically happier and experience feelings of greater well being. Only then can the compulsion towards short term thinking and gratification—which builds huge unsustainable long term debt—be stopped.
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