What do we owe our grandchildren?

Coming back from an extended conference on gross national happiness in Bhutan, which is one of the first carbon negative countries in the world, I became aware that intergenerational justice maybe one of the most important moral questions we face today. The world is drowning in debt. According to the International Monetary Fund (IMF), global debt amounted to $250 trillion in 2023, or 237 percent of gross domestic product, with global private debt at more than $150 trillion or 143 percent of GDP.

If global private wealth is now estimated at over $450 trillion, is debt of $250 trillion seriously a problem? It is, if net wealth is distributed unevenly. Worldwide net private wealth stood at $454.4 trillion in 2022. The highest wealth rung or 1.1 percent of the world adult population controlled $208.3 trillion in wealth, or 45.8 percent of the global total. Wealth is not only concentrated—it is concentrating as the rich get richer. So when GDP is rising and markets are hitting record highs, most people are not happy because of perceived income and wealth inequity. Wealth is of course passed from generation to generation. But with the gradual dismantling of death duties in many countries, and tax cuts for the rich, such as in America, wealth has been retained in wealthy hands.

At the household level, the bottom half of society not only do not have much wealth, but they are also in debt. The IMF, however, is more concerned with the rise in public debt, which is the burden of all citizens, including future generations. After all, the future generations inherit not just assets but also liabilities. The poor are also subject to higher interest rate on their debt due to higher credit risks. Thus, when incomes are insufficient to pay both interest and principal, the poor, including many developing markets, get further into debt distress.

Intergenerational justice refers to the ethical principle that present generations should not compromise the well-being or opportunities of future generations. Simply, future generations should have fairness in the distribution of resources, benefits, and burdens over time. When the existing generation is worsening social capital (through great conflicts between class, country, and along religious and racial lines) or through damaging natural capital (by cutting down forests, emitting pollution and carbon dioxide) we are leaving social capital and planetary resources in worse shape for our children and grandchildren.

There are two injustices staring us in the face. The first is human injustices against other people and the other is planetary injustice where we abuse Mother Nature. The baby boomer generation to which I belong, born after the World War II, has created the greatest wealth in financial terms the world has ever seen, with financial assets over five times global GDP. However, it has also left the planet much worse off in terms of biodiversity loss, pollution, destruction of natural habitat where pristine rainforests, marine reefs, and polar caps are melting, all of which will cause rising seas and loss of fertile lands which provide water, food, and energy for humanity. Our grandchildren will never enjoy pristine rivers and seas free of plastic and human contamination.

Debt is all about consume today, pay tomorrow. Theoretically, the rational economic man receives higher interest rates for delayed consumption, but if central banks print money to keep nominal interest rates low, the consumer and investor are both rewarded by incentives to consume today and by asset inflation. We are therefore in a GDP consumption trap, whereby households borrow to keep living standards up, and governments borrow to keep the citizens happy.

The late anthropologist David Graeber, who wrote on “Debt: The First 5000 years,” argued that debt was used to enslave people. He asserted that “what we owe each other is not debt, but the promise to build a world worth living in together.” In other words, he is talking about equity, which is owner’s capital. What the Bhutan concept of Gross National Happiness taught me is that equity is about intergenerational happiness—bequeathing well-being to not just current, but future generations. If we accept that we are not owners of our social capital, but stewards who are here to preserve, regenerate, and protect our natural and social habitat, then we move from the “take, make, waste” mentality of modern consumerism to one of recycle, reuse, and regenerate—helping to conserve our harmony with people and planet.

The current world of negative energy—geopolitical conflicts, social protests—can only be ameliorated if we harness our energies towards social and planetary well-being. It is the sacrifice of the present generation that makes our grandchildren better off. Is that too much to ask? Asia News Network