Conclusion

The welfare state is a nice thing to have, but we must be prepared to pay for it. The welfare state is built on the private sector producing the necessary material goods and the taxes used to pay for it. A too ambitious welfare state with its concomitant taxes may in fact hinder the growth of the private sector on which the welfare state is built. The accumulation of public debt in almost all rich countries is due to a rising gap between welfare ambitions of governments and their willingness or ability to let their citizens pay for them. Unfortunately,funds for a further increase in debt often dry up suddenly, with governments facing sudden problems in financing their ongoing deficits and renewal of existing debt. Sudden and deep cuts in expenditures or increases in revenue may then be necessary. The understanding among the electorate may lag far behind events, governing elites may suddenly lose their electoral support and usurpers or incompetent populists in waiting could be voted into office as untainted and worth a try. This is how the Nazis came to power in Germany about 80 years ago. The accumulation of public debt in rich countries will have to end, but whether it can be reversed in a timely fashion or will result in a political crisis and hyperinflation as in the interwar years is anybody’s guess.