Although often associated with the free market because it is the free market that produces the wealth that can corrupt, lack of prudence has little to do with economic systems as opposed to culture and historical experience. Given so many variables, one very rough proxy for cultural prudence can be derived from saving and borrowing rates. Poorer countries in the main are forced to prudence in borrowing and imprudence in saving, but some are exceptions. With only a $17,000 per-capita GDP, Hungary’s household debt to disposable income ratio is 45%, its savings rate 12%. Canadians, with almost three times Hungary’s per capita income, borrow twice as much and save one-fourth as much. Not surprisingly, the Germans and Japanese, perhaps smarting from the imprudence of starting and losing wars, are the champions. With incomes similar to Canada’s, they borrow half as much and save four and six times as much, respectively. Somewhere and not at all commendably in the mid-range, the U.S. saves two thirds as much as the Germans and borrows one and a half times more.
What a more complete analysis shows is that, as in some beers, in most of the rich economies personal and state fiscal policies are tall on froth and short on liquidity. The peoples of the West have been so long separated by multiple generations from existential struggles and appropriate respect of mortality that they emulate the grasshopper and have contempt for the ant.
Simply stated, so as—we imagine—to be richer, we have insufficiently attended to things like defense and public health, and for that, as certainly as day follows night, we will be so much the poorer materially and in spirit when our romance with imprudence becomes a marriage with suffering. Unless of course we change, but don’t hold your breath.
by Mark Helprin