Debt is often likened to fat. This is due to the idea that debt like fat is a weight that bears down on the individual (or country) and restricts what one can or cannot do.
To make this comparison is to misunderstand the biological reason for fat.
This misconception can be understood if we consider why the body requires fat.
We become fat if we consume too many calories in times of plenty, this if consumed in the form of fat or carbohydrates (we can’t store protein) is stored away.
Why do we store this excess energy?
In case there comes a time when food becomes less plentiful i.e. during winter or a famine. We can therefore use the extra energy stored as fat to stay alive and to find any morsal of food around whether that be fruit and vegetables or hunting down an animal that is also managing to survive the harsh times.
This shows that fat is the biological equivalent of an economic surplus. A surplus after all is a built up stack of money during times of plenty like a boom that you can then use when times are hard.
Debt is the exact opposite. Debt is the economic equivalent of your body shutting down because you are not consuming enough relative to the energy your expending in order to stay alive. If don’t balance your calories (tax revenues) with your energy expenditure (expenditure) then you will physically crash because your body can’t cope. We are experiencing one of the biggest global financial crashes in our history due to governments and banks not balancing income with expenditure.
As Nick Thornsby pointed out in his blog, Labour were overspending before the financial crisis hit in 2008. We might not have been anorexic as of 2008 but I’m guessing we were pretty darn close.
The problem with anorexia and the financial crisis is that you can’t cut your way out of it. It is impossible to cut yourself out of anorexia. You can cut your energy expenditure to bare minimum but if you aren’t consuming enough then your body will continue to shut down your internal organs. That leads to death.
In the financial crisis, we can’t cut ourselves out. We need to grow ourselves out. All non-essential spending should be cut but we need growth as well.
The fat cats sitting on surpluses have to realise that they built those surpluses exactly for this reason therefore need to spend it in order to create growth in the economy. Only by creating growth in the economy, will their need to dip into their surpluses diminish. They can then replenish their surplus.