Americans are a passionate breed. Get us started on something combustible like freedom of speech and we’ll burn the house down. Talk to us about deficits and surpluses and debt and you can see yourself out.
I have a modest goal of making you more “excited” about budgets by the end of this brief tirade, albeit not the happy kind.
First, I’d like to accuse the vast majority of Americans of not actually knowing what happens when a country defaults on its debt. Forgive me for shooting from the hip. No, I don’t have any polling data on it, which is surprising given polling agencies have time to ask Americans about their peculiar displeasure with the usage of “Arabic numerals.” Nevertheless, I’m quite sure of it. Americans just don’t know what would happen when the day comes that we can’t continue to pay our debtors.
But something does happen, and the most recent example of what that might look like is probably Hambantota Port on the southern tip of Sri Lanka.
You see, Western think tanks and media outlets like to deride China for what they call a “new colonialism” or “colonialism with Chinese characteristics,” whereby Beijing snookers unwitting foreign governments into borrowing vast sums of money they’ll never be able to pay back. The Belt and Road Initiative is rife with examples of this practice — so-called “predatory lending” in American parlance.
The Hambantota Port was initially financed to the tune of $307 million by China’s Export-Import Bank despite feasibility studies showing the port was unworkable. The cost of completing the port grew and grew until the Sri Lankan government could no longer afford the interest on the debt. Today, the port, including 15,000 acres of land around it, is “under lease” by China on a 99-year agreement. That’s right, a sovereign nation was forced to give up a strategic port to a rival because it could no longer afford the very terms it had agreed to.
We condescend when we express pity for these countries — many of which have democratically elected leaders — as if they’ve been bullied into their predicaments by methods we civilized Americans would never tolerate. Yet we are fundamentally no different, only we walk the plank willingly. Our representatives are not bribed or blackmailed into debt traps; they do it voluntarily because we’ve come to think of ourselves as special and somehow exempt. As if nothing happens after the default.
As Congress deliberates on spending another $3 trillion we don’t have and will have to borrow from unfriendly governments, Americans might do well to consider what they’ll be willing to part with when we can no longer pay our debtors. My guess is it will start with territories or intellectual property, perhaps Guam, but who knows what assets we’ll be asked to sacrifice when the time comes. And it is coming.
There was a time in America (1789-1913) when one-half of our bicameral federal legislature was directly beholden to state legislatures which probably would’ve been less forgiving of politicians who voted in favor of sinking us further and further into debt. Today, virtually all our representatives in Washington seem rather unconcerned.
“There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.” -John Adams
– Dan Jones is small business owner who lives in Phoenix.