Introduction: Motivation, the Explanandum, and a Road Map

As Chapter 1 noted, high and/or swiftly rising public-debt-to-GDP ratios (henceforth: debt) have become major political issues recently in many developed democracies. As shown in Chapter 2, much of the impetus for this recent debt growth originates in the different allocation of political and economic influence in capitalist democracy, which fostered transfers growth, which drove total-spending growth, which, finally, governments typically partially debt-financed. Figures 1.7–9 plotted the historical record of the resulting public-debt accumulation (gross consolidated-central-government debt for 21 OECD countries from 1948 to 1997).

Figure 1.7 revealed the relatively common experience of falling debt since World War II through 1972± and the dramatic reversal thereafter. Debt more than doubled in under 20 years in many countries, and in some it now tops 100% of GDP. The widespread and rising public concerns over these debt trends and levels and the number of theories emerging to explain them are thus hardly surprising. Beyond these commonalities, however, lie large differences across countries and over time in the level and variation of debt.

Cross-national differences in postwar average debt (Figure 1.8) constitute 55% of the total postwar variation in developed democracies' debts. Belgian and Irish debt, for example, averaged over five times German and Swiss debt, whereas New Zealand and the United Kingdom debt averaged about twice that of Norway. Countries' debt ranges also varied greatly over the period; interextrema ranges in Australia, Italy, Japan, Belgium, and Canada, for example, dwarf those in Switzerland, Denmark, Germany, and France.