The Problem of ``National Debt´´
A Libertarian Solution

François-René Rideau

This is a 2008 translation of an essay previously published in French in 2003, Le ``problème de la dette´´ — Une solution libérale.

Collectivists like to wave around as a flag a so-called problem of the ``National Debt´´ whereby ``Poor Countries´´ would be victims of ``Exploitation´´ by ``Rich Countries´´ and particularly of their ``Evil Capitalists´´. Collectivists call for ``Rich Countries´´ to ``Cancel the Debt´´ of ``Poor Countries´´ — that is, they want to force the taxpayers or the countries that remain relatively free to finance the spendings of dictators in more totalitarian countries.

To a libertarian, there do not preexist moral entities called ``Countries´´ that are capable of lending and borrowing. Only individuals may grant credit or accrue debt. Of course, individuals may organize, the ones into a bank, the others into a corporation, and voluntarily distribute amongst each other the decisions, the costs, the risks and the benefits involved in operations of credit or any other kind of operation. But the legitimacy of such organizations resides precisely in the voluntary character of the contract that bind their participants; this voluntary nature ensures that the liberty-responsibility of these participants is preserved and distributed amongst them, and not dissociated so that benefits are confiscated by ones, and costs rejected upon the others.

Now, in a National State, nothing is voluntary, — and even less so when the Governments of said ``Poor Countries´´ do not even have the pretense of being democratic. And even when these States are ``democracies´´, a libertarian will claim that its citizens did not have the choice of being subjects of the State or not: only the acknowledgment of the individual right for anyone to secede unilaterally may bring any legitimacy to the entities called ``States´´. From which it follows that the debts contracted ``by States´´, and that serve foremost to enrich the officers of these States and their friends, cannot in any way bind the citizens oppressed by those States, — not anymore than the debts of a slave-owner may fall back upon his former slaves once freed.

Therefore, the solution is simple: Debts only bind those decision-makers who contract them, as well as their direct accomplices. Presidents, ministers, politicians, bureaucrats, generals, activists from significant lobbies and unions, officers from big corporations in bed with government, as well as other State-men, all those who detain any political power, direct or indirect, official or unofficial, formal or informal — they each are responsible in accordance to their role in the decision to borrow. Faced with a possible default of payment from the citizens of a Country or from a further Government of said Country, the creditors (banks and other States) may legitimately turn themselves against those persons who lightly committed to paying back the considered debt (the above-mentioned State-men), but they may not turn against those innocent third parties that the oppressed citizens, victims of the borrowers, constitute.

Hence, lenders may recover from the corrupt State-men all the funds they embezzled, as diminished by all the riches that these robbers will have dilapidated. As for the unrecoverable difference, it will remain as a loss to the lenders; this will teach them the consequences of lending money to irresponsible parties! Thus, once the financial risk of lending money to Governments will fall upon the contracting parties rather than on innocent third parties, (the taxpayers of both lending and borrowing States), the sources of financing for such operations will quickly dry up.

No one will want to lend money to States anymore, and, by lack of means, the political exploitation systems worldwide will cease to function, one after the other. Certainly, there will be bankruptcies — those of all people who live directly or indirectly from the political exploitation of man by man; but these bankruptcies, far from representing a global destruction of wealth, will instead represent the restoration of justice, the retroversion of their liberty to the oppressed citizens, the restitution of their own wealth that had been usurped by exploiters.

The libertarian conclusion is that there isn't any problem with ``National Debts´´ — there is a problem with the illegitimacy of States. The solution is therefore not a pseudo cancellation, but a restoration of the legitimate rights of the individuals involved.[1]

It is clear that no Statesman, and no politician aspiring to ever become one, will ever agree to such a conclusion or even discuss its argument. The libertarian vision is way too subversive! The proponents of a world-wide statist order are instead well at ease to discuss the marxist arguments in terms of exploitation of countries by capitalists, which absurdities serve to justify ever more international technocratic institutions to ``regulate´´ things, as financed through massive taxes. To accuse these arch-statist institutions to embody the ``free market´´ so as to justify ever more statist institutions, here goes the statist scam!

That's why, on this topic as on so many others, to be heard, to have our point of view known as one worthy of discussion, is to have won the battle already.


[1]: The notion of the ``cancellation´´ of a debt is a fallacy. It sounds as if there were some ailment that could be dispelled by a wave of a magic wand. Cf. my other essay White Magic vs Black Magic.

Actually the so-called ``cancellation´´ is but a displacement: since riches have been dissipated to satisfy the whims of dictators, someone, somehow will have to pay — whoever that is. In reality, what Statists demand under the cover of a ``cancellation´´, is that the taxpayers of free countries should pay for the arbitrary spendings of dictators, bureaucrats, technocrats and demagogues of all countries. Such a measure, far from cancelling the ailment, does but displace it — and in the direction of more evil, in the direction of increased power for dictators, not just upon their own people, but upon citizens of the whole planet. This pseudo ``cancellation´´ as supported by all kind of socialists or ``liberals´´, is but the underwriting of all misspendings by the States, and the encouragement to further such misspendings. It is the door open to further donations to the benefit of dictators, under the guise of pseudo-``lendings´´ the vocation of which is to be cancelled later, and paid by the taxpayers of the relatively free countries.

What libertarians demand is also a displacement — and as opposed to the economic ignoramuses who hide behind statist contentions, I do not have the imbecile or hypocritical brazenness to claim that it would be a ``cancellation´´. The essential difference between the statist displacement and the libertarian displacement, is that the statist displacement happens towards more plunder, more injustice and irresponsibility, whereas the libertarian displacement happens towards more respect of individual rights, more justice and more responsibility.

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