I refer to Bill Wilson’s letter ‘Debt and the Wealthy’ (May 26, The NEWS) questioning the reason for privatization of the public debt.
If one accepts the maxim that the creation of huge sums of money in excess of any increase in the gross national product is inflationary, this provides the answer.
In the late ’60s and early ’70s, the government embarked on a path of huge deficits and debt. In endeavouring to handle the debt, the bank allowed inflation to climb to nearly 13 per cent and it became obvious in 1974 that it could not continue without worsening the problem. The answer was privatization, which has kept inflation low.
Admiration for debt-free North Dakota and its state banking system may be misplaced. In the 75 years following 1930, the state’s economy was relatively flat, with only modest growth in real terms. During this period, the small population of 780,000 gradually declined to 742,000. With this dwindling population, funding infrastructure was minimal and placed little strain on budgets.
To make a comparison with our own financial situation is unreasonable. For example, British Columbia’s population at the same time was smaller at 500,000. Strong growth in the economy over this period saw a population increase of 700 per cent. The financial burden of infrastructure to service this growing population, spread over an area six times the size of North Dakota, has been heavy.
Now with the discovery of the Bakken oil field, and the exploitation of this resource, the North Dakota government suddenly finds itself awash in revenue. Since 2000, the state has gone from the second worst economic performance in the U.S. to best. All supporting a resident population smaller than it was in 1930.
We should be so lucky.