As debt problems in America and other countries continue to threaten economies, people should wonder how these massive debt burdens came about. Clearly, there are forces at work that need to be dealt with. While we are never going to see a debt free America, we can at least work for a more sustainable future where debt is not causing so many problems. The first step in doing so is to look at some of the causes of debt and consider ways to address it.
The causes of debt
The causes of debt are complex, but they cannot simply be attributed to people not making enough money. In fact, the amount of debt has increased with the relative rise of material wealth in society. Furthermore, many of the richest individuals and nations have some of the worst debt problems while the poorer sometimes have relatively lower levels.
We can never earn our way out of debt, and the root cause is within us. People can blame banks, governments and other institutions. However, it is individuals making the decisions at all these places. With so many consumers living beyond their means and running up huge debts, it should be no surprise when their institutions do so also.
Wants and needs
Why do so many live beyond their means? People do run into difficulties they cannot control. However, most cases are primarily due to our endless wants in a society that makes going into debt easy and shameless. Debt was once something taken out only to finance the most vital needs. Now, consumers routinely borrow for things they could easily live without by using credit cards and other ways of borrowing. It does not even occur to them to at the very least save until they have enough money to pay in full. They can afford to pay extra by financing but cannot afford to wait.
The costs
The costs of this behavior, from direct economic costs to opportunity costs, are beyond calculation. Finances, from public to personal, are eaten up by interest, economic growth is stunted and unemployment increases. We then attempt to buy our way out of the mess debt created with even greater spending and borrowing that will bring more long-term consequences.
There are also the problems on personal, environmental and other levels. Debt limits people’s options and makes it harder to make investments in the future. Furthermore, environmental and energy problems would be greatly reduced if more thought was given to sustainable living.
A new perspective
It is not that people need to give up their possessions. What they do need to do is to learn to better appreciate what they have and avoid debt. For example, indoor plumbing, electricity and the like are all things most people take for granted now. However, they would have been unimaginable luxuries even to the kings and queens of old. While wants are limitless and can never be fully satisfied, they can be mellowed when those in wealthier nations consider how relatively well off they are.
A debt free America
A problem that comes from within human nature will never be simple or easy to address. One thing is certain though, America can certainly do better than the current system that actually discourages savings and encourages debt. Every effort is made to reward debtors with tax deductions, bailouts and the like while those who save are often penalized with low returns and extra taxes. In this and other ways, the message is always to borrow regardless of the reason.
It should be remembered that there are still many people who avoid debt and save money. They should be looked upon as models to be emulated. With so much devoted to teaching people ways to make money, some education on the ways to handle money would be a good balance. Perhaps with some encouragement, the idea of being debt free and saving can catch on with many in society and take on a life of its own as good ideas often do. A more thrifty citizenry will make its institutions run more responsibly too.
Like a recovering alcoholic, America first needs to admit to its addiction if it is ever to be free of some of the problems caused by excessive debt. With time and a change of attitude, more of America can be debt free and everyone will be better off for it.
