Big Government can print money and cause pollution

The growth of human population, production, and consumption would have been long-term problematic in any case, but it really accelerated with industrialism . . . after which, in addition to so much else, the size of institutions ballooned.

So we now have those mega-corporations. And mega-scale governments.

Along the way it became recognized that the latter have a special quality. Households and businesses that incur debt need to pay up within some reasonable period of time that’s specified in a contract. Giant governments that seemingly will “live forever” (or, at least, for a long time) and can print their own currencies don’t have to treat debt the same way.

The American government was small in 1800. At that time (and prior) all governments were small, except for those rare hypertrophied empires like the Romanov’s, Habsburg’s, Hohenzollern’s, Great Ancient Rome, etc.

By 1900 some nation-state governments were getting large. By 1950 there was re-thinking about their relationship to debt. Part of the Keynesian theoretical revolution was the idea that a large and enduring government does not need to balance its annual budgets in the way that households and businesses do.

The original “revolution” was to condone governmental deficit spending during recessions. If, later, surpluses were run during periods of economic expansion, well, budgets could be balanced over the course of cycles instead of year-by-year.

Once politicians were encouraged to do some deficit spending, naturally they did a lot of it. Everybody likes to have money injected into the economy. It’s a very popular policy! After 1950 there was lots of deficit spending and very few years when the government ran a surplus. Which might have become problematic … but then there was a new recognition: The government could keep running deficits, adding to the debt, as long as the growth of the debt was not greater than the growth of the overall budget. If the government’s debt service obligation crept up from 5% of the budget to 6% and then 10% and then 20%, eventually all the budget would have to be devoted to debt service; nothing left for anything else! But if the debt grew slowly in absolute terms while staying steady in percent-of-budget terms, no problem. If 5% of the budget every year needs to be devoted to debt service, no problem.

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But, lately . . .

Once the politicians got used to the idea that deficits and reasonably growing levels debt are OK, the momentum of more and more deficit spending (naturally) went beyond reasonableness. Lately the percentage of federal government debt relative to the budget (and to GDP) has snowballed.

So: time for a new justifying theory . . .

For a large sovereign government, such as that of the US, deficits don’t matter at all because money can be printed to monetize the debt.

What a popular idea! Print and distribute money and keep businesses afloat (whether profitable or not) and send out checks and juice effective demand.

Some worried that all the money printing would lead to inflation. If the consumer price index rose at 10 percent per year, that would make people poorer in real (inflation-adjusted) terms. But the CPI has not been ratcheting up at anything like 5 or 10 percent. The only significant inflation has been in asset prices (stocks, bonds, houses). So nobody loses (and the rich, who own the financial assets, gain).

As the politicians get used to the idea that money distribution (via artificially low interest rates) is OK, they’ll think of a million ways to keep doing it.

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Industrial capitalism will never self-limit its growth. Money, growth, and consumption are popular!

And the system is way too big, remote, impersonal for anyone to enforce a long-term kind of responsible behavior.

Ecological crisis will limit its growth. The production and consumption generates pollution and depletion, in myriad ways: greenhouse gases, reactive nitrogen, aquifers, soils, plastics, solid waste, ocean acidification, deforestation, desertification.

Instead of scaling back, the politicians and financial authorities will keep printing money, juicing growth, encouraging consumption, and leading our civilization smack into a wall labeled UNSUSTAINABILITY.