“Neither a borrower nor a lender be,” Shakespeare’s Polonius warns his son Laertes.
Today, however, many governments are getting by on borrowed money. Borrowing allows governments to cover shortfalls without having to increase taxes or cut back public spending. But too much debt can hurt economies, especially in a recession.
The US just passed $20 trillion in debt for the first time, while the UK owes £1.9 trillion ($2.5 trillion) and counting.
The US and UK are not the most indebted countries though. Japan’s debt reached 221.8% of GDP in 2015, according to the OECD Government at a Glance report.
How much is it per person?
One way to think about government debt is in per capita terms. So, for example, if the Japanese wanted to pay off their national debt, they would owe $90,345 each.
Among OECD countries, Ireland, the US and Italy are next, with $62,687, $61,539, and $58,693 respectively.
Belgium, at $58,134, is above the OECD average of $50,245.
Austria, France and Greece all have higher per capita debts than the UK, and their citizens would have to find almost $50,000 each ($49,975, $49,652 and $47,869 respectively).
Per capita debt among OECD countries has increased at an average annual rate of 5.9% since 2007. The amount owed per person in each country varies dramatically, from Japan’s $90,345 to Estonia’s $3,761.
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The rise of debt
The level of gross government debt as a percentage of its GDP is an indicator of how able a country is to pay back debts without incurring further debt.
When a government borrows money, it has to pay it back with interest. So when interest rates go up or the economy slows down, debt levels can become unsustainable.
In 2015, the average level of gross public debt in the OECD countries reached 112% of GDP. That’s compared to 73% in 2007, before the financial crisis.
Debt levels increased the most in Spain, Slovenia, Portugal, and Greece.
Only three OECD countries have reduced their debt levels since the financial crisis: Norway, Switzerland and Israel. Countries with the highest public debt throughout this period are Japan, at 221.8% of GDP in 2015, followed by Greece (181.6%), Italy (157.5%) and Portugal (149.2%).
Although Greece’s debt/GDP ratio is significantly lower than Japan’s, the consequences have been much more severe in Greece, not least because the debt is owed to foreign rather than domestic creditors.