Why it is unfair to pass the debt of one generation on to the next

During our recent economic woes, many people thought instinctively that it was fundamentally unfair or unjust that Irish citizens assumed the costs incurred by risky foreign investors in Irish banks. But there is a more serious injustice closer to home, much larger in scale and duration, when the State borrows every year to cover its budget deficit.

Imagine someone takes out a very large mortgage on a house – one that could never be repaid in their lifetime – and then finds their indulgent banker allows them to borrow more for day-to-day spending and to add those debts to their mortgage. But they don’t plan to default on the debt; they’ll bequeath it to their children. In due course, the bank will sell the house to recover a fraction of the outstanding mortgage, and the children inherit just the outstanding debts.

Of course it would be impossible to implement that plan without the children’s consent or some very subtle legal manoeuvres. If, however, they could lock the unfortunate legatees into some kind of legal association with them, the prodigal borrower could escape responsibility for repaying their own debts. That is what a state does when it borrows consistently to pay for the day-to-day costs of running the country.

Benedict Anderson invented the suggestive concept of an “imagined community” to capture some connotations of what we mean by a “nation”. We imagine a “people” that shares a common identity – thorough language, culture, or religion – and we think its members are so united that there is a something that can be said meaningfully to exist from one generation to another. The preamble to the Constitution speaks about such a people that persevered “through centuries of trial” and the text mentions the Irish nation 10 times.

This trans-generational nation existed before the foundation of the State; in 1937 it exercised its right to establish the political, legal, and administrative features that define a state (although the Constitution then used both terms, “nation” and “state”, as if they were synonymous).

Borrow monies

Once in place, the State (as a legal structure established by the Irish nation) was entitled to borrow monies on behalf of its citizens. According to the Department of Finance, its current general debt is €215 billion, which is projected to rise slightly (by a mere billion) by 2018.

Whether this debt is sustainable is a question for economists. It depends (among other things) on the confidence of those who lend to the State that the debt is repayable in principle, that the State will not default etc. But the decisions to incur such large debts and to pass on the bill to another generation also raise another question: about justice.This question is often raised in the context of environmental degradation, if one generation of people so damages the environment on which our well-being depends that it harms subsequent generations. The problem is that the current generation cannot be held accountable for the damage; its members will have died.

One might object that future generations do not exist now, and that we have no moral obligations to non-existing future persons. One might even argue that such a theory of justice assumes a suspect metaphysical theory about future people, which those of a sceptical disposition should just ignore. Unfortunately, the same suspect metaphysics is used to link past and future generations in the concept of a nation and to borrow vast sums of money now for benefits we enjoy and for which a future generation pays. It would be difficult to argue against borrowing for major capital projects and spreading the costs over many years. In that case, at least, we would share both the costs and the benefits with future generations. But it is very different if we borrow to fund our current non-capital needs. In this case, we enjoy the benefits and our descendants pay the bill.This is not to suggest that any government should dedicate all its current income to decreasing the national debt – a sudden major shift of policy would kill off the economy and, with it, all hope of economic recovery. But each government faces the challenge of telling voters, especially at election time, that there are things they cannot afford without paying for them themselves. It is rational for those who wish to be elected (if acting only in their own electoral interests) to tell voters they can enjoy extra benefits simply by borrowing internationally, and that they should not be concerned about when (or by whom) the debts are repaid.

Lower taxes

Those who promise most are most likely to be elected; free water, free healthcare, lower taxes, etc. Cicero argued over 20 centuries ago that mankind evolved from a state of nature (when individuals looked only to their own interests) into a viable society because politicians used rhetoric to persuade them they would be better off by co-operating. The minimal conditions for accepting a system of rational co-operation were called justice.

Politicians still face the same challenge. They have a duty to persuade citizens it is unjust to borrow for their day-to-day needs and then pass on the debts to future generations because, if the latter had a choice, they would not consent to such a scheme.

Desmond M Clarke is emeritus professor of philosophy at UCC and a member of the Royal Irish Academy