The Bankrupt State

I wrote this feature on debt 10 years back. The state can keep piling on debt but history suggests that eventually the cycle turns.

“Man cannot be trusted with the government of himself.”

Thomas Jefferson

The failure of the state is a cyclical event connected with debt. The reason we are never prepared to handle it is that we as a society are cycle blind.

A search on “state”, “failed state” will bring out search results like real estate, United States, state insurance, anything but the idea of a state. It’s not only on the world wide web but even real societies that still struggle to accept the idea of a failed state.

Why does a state fail? What does failure encompass? Is it just about payment defaults, cutting pensions, being unable to generate jobs or growth, failing the poor, failing the trust of its own people, or it something cyclical? It’s not the first time politicians failed the public. In an article written by Martin Armstrong in 1991 ‘The Cycles of Political and Economic Change’ in the Cycles magazine, the author quotes Cicero before the senate of Rome in 63 BC. “The budget should be balanced, the treasury should be refilled, public debt should be tempered and controlled, and the assistance to foreign lands be curtailed lest (we) become bankrupt.

Armstrong wrote in 1991 “These words serve as a fresh reminder of cycles, no matter how much we believe things have changed, indeed, much remains the same” Looking at the current state of affairs, the only thing which comes back is the cycle. The issue of debt has been with man from the beginning of time. Though popular belief holds that prostitution is the oldest profession, the banker (money lender) is truly the oldest profession. Man’s history of debt is a history of the crisis. Virtually every known war has been fought for economic reasons, usually disguised by some noble saying or religious slogan. But without hardship or greed, there would be no incentive for war.

The Soviet Union break up was a direct result of economics and the crisis is debt that the communist government managed to create. The American Revolution was fought more for economics. Saddled with escalating debt, England levied excessive taxes on its colonies. Worst yet, it demanded that the colonies pay all taxes in gold, while England paid for colonial goods in copper. The king sought to bleed colonies to reduce his debt at home. That unfair policy, born from a crisis in debt, sparked the American Revolution.

Raymond Wheeler’s 300-year cycles based on his many years of research into cultural cycles and the recurring cultural curve mentioned that culture is revived in a Renaissance of classical, idealistic themes. Tyranny prevails as the state becomes dominant over the individual. During “cold” epochs, civil rebellion ushers in democratic reform and a revival in the importance of the individual.

Thomas Jefferson said, “Man cannot be trusted with the government of himself.” History has answered Jefferson a thousand times with a cycle of unqualified regularity. No matter how noble a form of government starts out to be, it always degenerates into the very thing it was created to replace. I believe there are more instances of the abridgment of the freedom of the people by gradual and silent encroachments of those in power than by violent and sudden usurpations.

All forms of governments start out as benevolent seeking to correct the evils of its predecessor. But given enough time “silent encroachment” takes place. Looking at history, mankind acts like a dog chasing its own tail, running around in endless cycles.

End of the Roman Empire, the year 476 is generally accepted as the formal end of the Western Roman Empire. That year, Orestes refused the request of Germanic mercenaries in his service for lands in Italy. The dissatisfied mercenaries, led by Odoacer, revolted and deposed the last western emperor, Romulus Augustus.

The fall of the Ottoman Empire can also be attributed to the failure of its economic structure, with the size of the empire creating difficulties integrating its diverse regions economically. Also, the empire’s communication technology was not developed enough to reach all territories. In many ways, the circumstances surrounding the Ottoman Empire’s fall closely paralleled those surrounding the decline of the Roman Empire, particularly in the ongoing internal tensions. Similar internal tensions brought the Spanish empire down.

The failure is connected with mass psychology, which at one stage wants to be lead and at one state wants to lead. The failure is linked with problems of a large economy that fails to grow beyond a stage and starts to exhaust. But more than anything the failed state is connected with the failure of the character of our leaders, who start on a good note but end up undoing the same good intentions. A failure of a state starts with debt and ends with debt. The best part is that it’s all cyclical, forecastable, and hence avoidable to the extent of reduced pain. The worst part, the majority of us move up and down as the time cycle dictates, punishing us for being cycle blind.

First published in June, 2010