November 11, 2006

NB Indebted to the World

New Brunswick indebted to the world
Volume 03, Issue 45
Nov. 9 - Nov. 15, 2006

New Brunswickers, and Canadians in general, are racking up more debt than ever.

"This is the twentieth consecutive quarter that the indebtedness ratio has been on the rise," notes second quarter findings from Industry Canada's Office of the Superintendent of Bankruptcy.

But our collective debt isn't just monetary, it's also planetary.

A report from the World Wildlife Fund released October 26 shows that humanity is running a nasty tab with mother earth.

The report measures our ecological footprint, or how many hectares of arable land each person uses for their yearly consumption patterns. In 2003, our footprint exceeded global biocapacity by 25 per cent.

The planet is quite a remarkable creature and can usually heal itself when resources are used. However, the WWF report shows that we are borrowing - or more accurately - taking from the planet at such a rate that it cannot replenish itself.

If we keep borrowing from world ecosystems at 25 per cent per year, an environmental collapse probably is not too far away. Eventually, we will have to change our ecological borrowing patterns or pay the piper.

Canadians had the fourth worst ecological footprint on a per capita basis of any country in the world, surpassed only by the United Arab Emirates, Finland and, of course, the United States.

On the economic front, the situation could be worse.

The Superintendent of Bankruptcy doesn't keep New Brunswick specific statistics, but as a region, the number of people declaring bankruptcy in Atlantic Canada dropped 8.1 per cent, compared with 2005 figures. Increased bankruptcies are usually a sure sign people are borrowing too much.

However, the numbers can be deceiving, lulling us into a false sense of passive acquiescence while we live it up on borrowed wealth. The debt-to-income ratio reached 120 per cent during the first quarter of 2006, a 0.5 percentage point increase compared to the preceding quarter.

People, especially the young buoyed on high limit, high interest credit cards and still low mortgage payments, are leading the charge towards debt financed hyper materialism.

"The general consensus is that people, particularly younger people, are sticking their financial necks way out to buy a fancy house instead of a 'starter home,' a $40,000 SUV instead of a used compact, designer clothes instead of Frenchy's wear... all on a contact centre worker's salary (or maybe two)" wrote Rod Allen in The Times & Transcript.

The problems of consumer and environmental debt are clearly interconnected: people are buying too much stuff, hurting themselves and the planet.

For individual New Brunswickers, there are a couple fairly basic policy solutions to debt servitude, aside from the obvious: buy less crap.

Since the deficit cutting of the 1990s, the federal government has passed public debt onto private citizens. As Canadian autoworkers economist Jim Stanford notes, "Canadian consumers ran up their debt last year (2004) by 50 billion dollars, more than the largest public deficit ever." Governments are far better equipped than individuals to cope with debt loads. They can negotiate lower interest rates because they are larger entities and can issue bonds to pay their creditors.

Student debt is the most obvious manifestation of debt downloading from governments to individuals. Between 1990-2005, average student debt across the country increased by a whopping 300 per cent, according to the Canadian Federation of Students. The average student with a four year degree finishes higher education $25,000 dollars in the hole.

While the silly materialist who buys an SUV and a cruise ship vacation on his credit card can easily declare bankruptcy if things get out of hand, students who are trying to better themselves and the country by investing in education, have to wait ten years before they can declare bankruptcy from government student loans.

Individuals can recover from personal bankruptcy in a matter of years. It certainly isn't a pleasant experience nor is it a matter of life and death.

But if humans don't pay their debts to mother earth for our ever expanding ecological footprint, then we are going to get our collective legs broken.

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