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Why the US is an economic burden on the world

Last updated on: June 23, 2008 15:36 IST

It could be comic or tragic, depending on your sense of morality. In what I see as stunning news from the United States, 17 schoolgirls have entered into a 'pregnancy pact.' Staff at a secondary school health clinic in the city of Gloucester, Massachusetts, became suspicious after seeing a surge in girls seeking pregnancy tests, most of whom are below the age of sixteen.

But that is just the beginning. The school's principal is reported to have said: "Some girls seemed more upset when they weren't pregnant." The school is reported to have "administered 150 pregnancy tests" last year alone. In an ironic twist to the tale, press reports suggest that the school itself allows distribution of condoms and contraception with 'parental consent.'

Strangely, despite the enormity of the problem, many are looking at the issue through the legal lens. One of the officials of the school is reported to have said: "We're at the very early stages of wrestling with the complexities of this problem. But we also have to think about the boys. Some of these boys could have their lives changed. They could be in serious, serious trouble even if it was consensual because of their age --not from what the city could do but from what the girls' families could do."

All this has raised many questions and the reasons could be many. Adults in Gloucester, according to press reports, blame economic depression, broken families skewered sense of status and movies like Juno and Knocked Up that glamorize pregnancy. Experts, according to reports, feel that celebrities like Jamie Lynn Spears, sister of Britney Spears, sent out the wrong message to teens by getting pregnant at 16.

How the US sees this

All these are not remote happenings in some corner of the world that can be brushed aside. Rather, in a globalised world, they affect you and me -- not only within the narrow confines of civilisational values -- but also through the broad prism of economics.

Naturally, in a globalised world, all these have an impact not only on the national economy, but also on the global economy.

But the problem with understanding economics, especially when articulated by economists is that they understand and explain economics as a discipline completely disconnected with the larger question of how culture and civilisational values impact economics.

To comprehend all this, a brief reference to the manner in which the society in the US is arranged is necessary. Francis Fukuyama, in his celebrated book -- Trust: The Social Virtues and the Creation of Prosperity -- has elaborately dealt with the extant issues. According to Fukuyama, the US had undergone a 'rights revolution' in the second half of the twentieth century.

This revolution, he believes, has its roots in the Christian Protestantism which provided a moral basis for the promotion of individualist behaviour while simultaneously weakening other tendencies towards group life. This is evidenced by the disintegration of even the nuclear family and community with a concomitant rise in social isolation within the US.

It may be amazing to note that these thoughts and ideas are not merely the products of the late twentieth century. In fact, such thoughts permeate the entire length and breadth of the US constitution as it pervades in the political thinking of eminent western political thinkers, notably Thomas Hobbes and Thomas Jefferson.

And the fundamental assumption that has driven such political thought has been that man is born not with duties but with rights and rights alone. Whatever duties he takes on, he acquires as a result of his free will -- neither necessitated by law nor expected by society.

This primacy of individual rights is substantiated by the words contained in American Declaration of Independence: "Man is endowed with certain inalienable rights."

Subsequent thinkers have even suggested that not even the family is necessary for human sustenance. Based on such extreme ideas, constitutional experts in the US argue that parents and children may have mutual obligations of love and respect, but parental authority should end when the children are capable of reasoning things out on their own.

The culmination of all these political and social thought, evolution of constitutional law and, of course, societal values has resulted in 16-year-olds getting pregnant through a pact.

Remember, no one -- including the parents of these children -- would have any constitutional right to question these kids. In fact, should they attempt to do so it would well be seen as interference in individual rights.

The impact on the US and by extension the global economy

This proliferation of unfettered rights had a two-fold impact on the US economy: one, it led to the government assuming some responsibilities of an individual that would normally be in the hands of the family in other societies, and, two, this led to increased and reckless spending by individuals.

As the role of the government increased, it began to collect taxes to fund its increased responsibilities. No wonder, the government spending in the West ranges from a third of the GDP, as in the case of the US, to over two-thirds -- yes, two-thirds! -- in case of some Scandinavian countries.

In contrast, the government in India, both at the State and the Centre, put together account for less than one-sixth of the GDP. Yet, our governments are advised to prune and privatise.

And strangely our experts, educated in Harvard, Oxford and Cambridge concur, little realising it is the family that performs most of the functions of those governments. The next logical question: If a large part of the responsibilities is in the hands of the individual, why blindly tax the individual on his income in India?

Bereft of responsibility towards the family, individuals in the US could engage in reckless spending. Crucially, with a government that takes care of their pension and provides protection in their old age (social security), Americans can afford to have an entirely different set of economic policies, rooted in individual rights, unfettered consumption and reckless spending.

But this recklessness has already taken a heavy toll on the American economy and, consequently, the global economy. It is precisely for these reasons that the American economy is unable to produce enough for the American people and increasingly relies on imports aggregating about $800 billion every year.

Simultaneously, the American government -- owing to the huge responsibilities cast on it by the system -- runs massive budget deficits. To fund these twin deficits, Americans are continuously borrowing from the world in excess of $2 billion a day. No wonder approximately 70 per cent of global savings are routed to the US to fund their imports.

And yet we think of America as a rich country and expect it to fund our development!

Responsibility is the bedrock of discipline, be it at the individual, the national, or the international level. When a society is built purely on individual rights -- as the American society has been -- it leads to massive indiscipline.

To put things in perspective, Americans constitute 5 per cent of the global population, but consume about 40 per cent of the global resources.

In the process, not only are the Americans sucking out the natural resources from the rest of the world, they are dependent on the rest of the world and routing out precious savings to fund their recklessness. This idea of funding the recklessness of the Americans by the savings of the rest of the world goes on by the innocuous appellation of 'globalisation.'

Those 17 schoolgirls are fully aware of this entire paradigm -- one, that there is no family member who can stop them; two, that if they get pregnant the US government will take care of their babies (thanks to social security); three, no one will ridicule them and there is no societal taboo (thanks to unfettered individual rights as guaranteed by the US constitution); and, finally, the world is ready to fund deficits of the US (thanks to globalisation). No wonder they contributed their bit to the American recklessness.

For all these reasons aren't America's societal values and economic, political and legal systems an economic burden on the entire world?

The author is a Chennai-based chartered accountant. He can be contacted at mrv1000@rediffmail.com

M R Venkatesh