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prout.econ

Deficit Spending

April 13, 1995

Q: Should governments be required to maintain annually balanced budgets? Or can there be deficit spending?

The economy of a nation will not be strong if it is only a theoretical economy and not an actual economy. There must be a solid base for economic development, otherwise inflation and depression are bound to ensue. So the economies based upon deficit spending, these theoretical economies without a practical base for their development, are bound to eventually come to a point of crisis. They are unstable.

Once a situation like this has developed, there is little to be done but to go the route. Such an unstable economy will not have a solid base in production. There will be inequities between production and consumption. There will be inequities between the rich and the poor. There will be many difficulties in such a society, and the weak economy will lead to human suffering. Once such a situation has been brought into existence, either dramatic economic reform must be implemented in a systematic, socially aware fashion or the out of control economic situation must be let to run its natural course which will end in complete collapse if allowed. At that point, a socially aware, systematic, economic program may be developed. It may also be developed earlier should major reform and practical methodologies be implemented. But in a capitalist country this may be very difficult due to the vested interests of the capitalists. Because of these vested interests, this type of practical reform will be unacceptable, and therefore the economy may need to run its course.

It is not so simple as a mere balanced budget. There must also be a balance between production and consumption, and there must be a balance between what is produced within a country and what is bought from outside -- taking the resources out of the country and what is imported and what is exported. There must be a balance in all areas for there to be stability in the economy. A stable economy cannot be completely unregulated simply to run away with the pulls and pushes of economic expansion. It must be systematic. That is why a Proutist economy, a Proutist economic approach, is advisable. But this type of practical social economy cannot be established unless there is a willingness to divest certain parts of the economy and invest in other parts. So, in a capitalist system, where vested interest dominates the economy, it is very difficult to establish this approach. They are incompatible.