Public Debts And National Sovereignty From The 12th To The 21st Century

Public Debts and National Sovereignty from the 12th to the 21st Century

Following a series of crises of exceptional gravity, in 2008, the world economy entered a phase of high and growing indebtedness that fragilized its system on its financial grounds. On top of this, the dramatic prospects of the cost to fight climate deregulation will weight for at least two decades on our public finances. History shows that since the time the Italian city-states invented perpetual public debt to protect their monopoly over international trade, the world has been through long cycles of indebtedness and deleveraging. Through many experiences, developed countries have limited the cases of default on their debts, however defeated countries like Germany and Japan did not escape major failures. On the other hand, many emerging countries are more prone to default due to weak financial institutions and currencies. What could we learn from these experiments for our current situation? One central point is that, without doubt, solidarity, and cooperation between all nations of the world to fight climate deregulation and to share the costs is necessary. The risks of fragmentation on these issues would be disastrous. The second central point is making large multinationals and very wealthy people take on a fair share of the burden, notably by eliminating tax heavens.

Public Debt Through the Ages

We consider public debt from a long-term historical perspective, showing how the purposes for which governments borrow have evolved over time. Periods when debt-to-GDP ratios rose explosively as a result of wars, depressions and financial crises also have a long history. Many of these episodes resulted in debt-management problems resolved through debasements and restructurings. Less widely appreciated are successful debt consolidation episodes, instances in which governments inheriting heavy debts ran primary surpluses for long periods in order to reduce those burdens to sustainable levels. We analyze the economic and political circumstances that made these successful debt consolidation episodes possible.

Rethinking Sovereign Debt