Government debt: causes, effects and limits
The Coordinating Committee of the National Academy of Sciences Leopoldina approved the establishment and funding of an interdisciplinary working group on government debt in the fall of 2011. The subject has been – and remains – a topic of heated debate in politics, the media, business and the public and even between states. Many of the opinions voiced are not only controversial but also frequently based on dogmas, economic interests and false analogies. Two events added fuel to the public debate in Germany: the financial and economic crisis that started in 2007/08, followed by the debt crisis of some euro-area member states in 2010, and the amendment to the German constitution (still known in Germany as the Basic Law, or Grundgesetz) in 2009 to incorporate the debt brake. An interdisciplinary working group called “Government Debt in Democracies: Causes, Effects and Limits”, composed of the Berlin-Brandenburgische Akademie der Wissenschaften (Berlin-Brandenburg Academy of Sciences and Humanities) (lead), acatech – Deutsche Akademie der Technikwissenschaften (National Academy of Science and Engineering) and the Leopoldina – Nationale Akademie der Wissenschaften (German National Academy of Sciences), was formed for the purpose of helping to raise awareness of this topic among policymakers and the public by compiling and answering fundamental questions on government debt.The topic is, however, also being debated hotly by academics involved in the subject.
Each member of the working group brought to the table what Charles P. Kindleberger used to refer to as strong priors, i.e. they already had a strong opinion on the utility or risks of government debt. The plurality of views was very large, and an assessment of the members’ willingness to modify their positions during the discussion process in order to incorporate new information was very difficult. Some members of the working group wondered – not only at the beginning of our consultations but long into the discussion process – whether it would even be at all possible to arrive at a report on which all parties could agree. However, the participants’ interest in the topic and their willingness to reach a consensus on core takeaways from the different positions won the day over dogma for its own sake. Group dynamics played an important role in this process.