The Role of Government in Building Sustainable Private Sectors

Our appetites are bigger than our stomachs. People eat themselves obese. They want; they do not need. Greece wanted more than it needed. It sacrificed this generation of individuals throughout the post-Euro time frame by leveraging their futures. They spent as if they were growing tremendously. When the banking crisis hit, and their ability to refinance disappeared, they ended up the pauper. You see this regularly in the insurance, banking, and loads of other industries as well. Enjoy the highs of today without worrying about tomorrow. 

Sustainability requires that our consumption of resources not exceed the rate of the system's ability to replenish those resources. At a very simple level, that could be used as a definition of sustainability. So when applying that to a nation, a country can not spend more than it brings in indefinitely. At some point, it will no longer be able to pay off the debt. So why do governments increase spending in an economic recession? 

First, the people demand it. They need help. If the government only takes from the people, the model is not sustainable (it will consume all of the resources). The government therefore increases its services to its constituency. Usually, those interests that are strongest in the national infrastructure get the lions share of this government spending. See the inordinate amount of governmental subsidies that go to farmers across the globe for an example. 

Second, those in need actually increase as private enterprise is in a period of decline. Economists hope that governmental spending will provide a boost to private enterprise. Usually, there is some sort of "cheap" money made available to consumers. The theory being that if you increase the amount of money exchange in the system the more people will benefit. 

Another reason is that those who theoretically believe the government should play a stronger role in the nations private sector are actually strengthened as more people fall on hard times. If you need governmental assistance, you are more likely to support politicians who favor governmental assistance. Simple arithmetic. 

Another piece of simple arithmetic, if you implement austerity (as it is currently being defined by Global Capital) you will have far less money exchanging through your national economy, especially when you combine it with an enormous debt burden. As we can see in Greece, this is a recipe for political economic disaster. This recipe does not result in growth, instead it results in massive retraction.

So what is the answer for governmental action in an economic downturn? It seems that neither of the two most common approaches are sustainable in the long term. Maybe the answer is not in changing governmental action, but rather having private enterprise maintain sustainable business models. Models that demonstrate resiliency. Maybe some strong regulation of aspects of the national/international economy are so essential that leaving them simply to the "free markets" which strongly encourage immediate over consumption beats having to teeter back and forth with government services. It certainly beats austerity. 

What are the aspects of the economy that need to be regulated for overall sustainable economic growth? I would proffer that the most essential element that needs strong regulation is the commercial, retail, and investment banking industry. Not only requiring capital controls, but returning to a system of required responsible lending.