THE HISTORY OF GOVERNMENT DEBT JUSTIFICATION

Abstract

The objective of the paper is to study the evolution of attitudes toward government debt over the period of human history from the Middle Ages to present day. This article is especially relevant in light of recent events. The skyrocketing government debt has recently led to the lowering of credit ratings in the USA, Greece and Italy, which may cause a significant economic downturn. To reach the established objective, the following research methods were employed: comparative analysis and synthesis, historical and logical approaches, observation and aggregation. As a result of conducted research, the history of the national debt justification was divided into five basic stages. The authors critically analyze the theory of capital erosion and demand-side economics. Detailed study of the first four stages showed that attitudes toward public debt evolved from total rejection to approval and all-round justification. However, global financial crisis indicates the transfer to the fifth stage, in which sovereign debts require reasonable restrictions and international regulation.

DOI: http://dx.doi.org/10.5755/j01.em.17.3.2109