Debt, Not Capitalism, is the Problem

credit-card-debtOur national financial crisis is not the inevitable failure of capitalism, but instead the inevitable failure of debt.  Debt is toxic at the personal, national, and global level.  Like anabolic steroids, it promises to make people (and nations) more of what they want to be, faster than is naturally possible.  At first, debt provides immediate positive results, giving citizens and government leaders the perception that borrowing money is wise.

This is similar to the man who jumps off the roof of a fifteen story building and proclaims to a horrified crowd when he passes the fifth floor that everything is going great!  Unfortunately, debt eventually takes more than it gives.  Individuals, corporations, and nations only go bankrupt when they have borrowed money.  We all know people (with high and low incomes and extensive and limited educations) who were suckered into debt by their desire to grow rich faster than what is natural.  Like gambling, a sufficient number of borrowers succeed at creating quick wealth to lure a significantly larger number of people into the poverty debt usually provides.

I live in Montana, and the Democrats have recently nominated Amanda Curtis, a young, energetic socialist to run for the open Senate seat once filled by Max Baucus.  Mrs. Curtis, a one-term state representative from Butte, is unabashedly strong in her vilification of capitalism.  To Mrs. Curtis, there is something immoral about two parties meeting the needs of one another in the marketplace under terms to which both parties agree.  Like many young socialists, Mrs. Curtis fixates more on the inequality of capitalism rather than the improved quality of living it brings to all members of a capitalist society.

Debt, not capitalism, is the evil that needs to be addressed. While debt is a component of modern capitalism, it is not a necessary one.  Throughout history, individuals and nations have achieved financial security with little or no debt.  Traditional religions have admonished debt for centuries because of its enslaving qualities.  Unfortunately, our current federal government encourages debt.  It insures the loans (deposits) we make to banks, and it insures many of the loans the banks make back to us.

From the government, we get tax incentives to borrow money and tax disincentives to make money.  On Wall Street, the federal government partners with bankers to cook up exotic new forms of debt that will give citizens wealth and prosperity that naturally is not theirs to have without work, time, prudence, and thrift.  When the government borrows money from our enemies to provide us bread and circuses, it is just a matter of time before our enemies become our masters.

I believe capitalism, when personally practiced with prudence, brings more prosperity and freedom to more people and nations than any other system.  I am concerned that politicians like Amanda Curtis will end up throwing the baby out with the bath water.  Instead of teaching the evils of capitalism, political leaders should be teaching citizens to avoid debt at both the personal and national level.  Enron, MF Global, and college kids swimming in student loans are all tragic not because capitalism is a failed system, but because in every case the agents involved used debt to achieve riches faster and easier than is naturally possible.

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