What is social debt?
Within a family or a business, there are incomes and expenses, if a family has a total income of £30,000 but their family expenses are £35,000 then they create debt by having to borrow money to keep afloat.
This debt has to one day be repaid, which means the family would need to reduce expenses or increase income until they have fewer expenses than their income.
If the family does not do this and continues to take on debt, they will be in severe trouble and eventually have to answer for the debt.
Businesses work in exactly the same way they have income in the form of revenue and expenses in the form of all of the costs of running the business, including the payments to the owners.
When a company’s expenses rise above the revenue then the company is in trouble and may have to be liquidated.
Social debt works in the same way but at a societal level. When a country has more expenditure than the income it needs to raise income in the form of taxes or borrow money in the form of debt. But at the societal level, there is a greater level of complexity as society builds debt in different areas.
Local Societal Debt
Locally debt can grow due to the lack of inward investment in an area, causing a lack of jobs, that reduced opportunity reduces the number of people who thrive to get a better education and those that do move away to where they can utilise their education.
This reduces the likelihood of businesses investing in the area due to a lack of an educated workforce, creating a downward cycle which can only be broken by intervention.
Local Societal Debt can also be in the form of infrastructure which is not maintained or a local community which does not pick up litter or clean off graffiti, although the Broken Window theory is a fallacy, it is true that the longer you leave a place with broken windows, or graffiti, the more it will cost to fix all of the damage.
National Societal Debt
For example, within the United Kingdom, we have a National Health Service (NHS) which at the time of writing is in a lot of trouble financially. without going into the political issues with this the main issues are financial.
When it was conceived in 1948, healthcare was relatively cheap, most operations we have today did not exist and the majority of the treatments were simplistic, and the outcomes were not particularly good with the life expectancy being much lower. Now, however, treatments are much more complicated, and people live much longer, giving rise to many new illnesses and complications which cost the NHS a lot to help people.
The cost to the UK population has not grown in line with these additional costs, meaning the service is always a breaking point with successive governments making promises of reform and increased spending.
But the biggest issue for the NHS budgets is that they are reliant on other services to perform their jobs, and many patients are left in hospitals waiting for supported living options to be made available. The costs of these are usually absorbed by the local government which has had budget cuts reducing the available beds and support available.
International Societal Debt
On an international scale, it is the debt to other countries, in the west, we have managed to obtain great wealth from other countries using trade, taking their natural resources or utilising their workforce for the benefit of our customers, artificially maintaining low costs of goods so that businesses in the west are able to maximise profits.
A recent example of this is when clothes retailers were contracting the manufacturing of clothes in Bangladesh for less than the local minimum wage, causing problems for the local manufacturers in maintaining staff and keeping to the local laws. But at the same time, prices to the consumer were increasing.
Another example is when a manufacturing process is deemed to be too polluting or dirty, instead of investing in new technology, it is easier to outsource the process abroad, this does not solve the issue but it does export the problem to someone else and the company is able to greenwash the product.
Global Societal Debt
The last example also moves us into the global societal debt. Climate change is real, it has been proven by modelling and by actually tracking the rise in temperatures over the last couple of decades. Yet countries and companies are not taking the action needed to minimise the impact.
Since the 90s we have known about climate change, some businesses have moved their most polluting processes abroad, and others have invested in other ways to produce their products, but we are still polluting the atmosphere more and more every year.
The debt that has been accumulated over many generations and is now being called in with the cost now being people’s homes, the habitats of both animals and humans, plus the lives of both humans in natural disasters and also the extinction of other species.
