Once upon a time, there was a village called Hope in the country of Wonderland.
Hope was a rich village, the fifth richest in all of Wonderland.
For hundreds of years, it had been very successful. Then, as the result of a couple of feuds with a nearby village a century before, it had been less successful. But it was still rich. Indeed, as I think I may have mentioned already, it was the fifth richest village in the world.
But Hope had a problem. The problem was the way it was run. The village had an odd system of government. Every grown-up in the village could vote. And every voter could vote for anyone they liked. But Hope always ended up with one of two men running the village; the squire or the vicar.
The squire loved his village and was proud of its long history. He prided himself on his ability to manage things. After all, he owned a fair amount of the village real estate and he had a pretty good track record of making things work and keeping an eye on the money.
The vicar, on the other hand, was more concerned with how the money in the village was distributed and was very keen to redistribute the village’s wealth more equally. He had less experience than the squire of running things and keeping an eye on the money. He had a tendency to harangue the congregation from his pulpit. But everyone said: “His heart was in the right place”.
Don’t misunderstand me. They both agreed on many things. They both maintained the village hospital and the village school. Each of them, when elected, aimed to spend more and more on both. And they both took large amounts of tax from the wealthier villagers to maintain the hospital and the school and to help the poorest villagers.
But they didn’t agree on everything. The squire was always talking about “living within one’s means”. This meant that, whenever the village overspent and had to borrow, the squire got a bit edgy. The vicar, on the other hand, believed that making life in the village better was the most important thing, and that, if that meant borrowing, that’s what you should do.
So, when the squire was in charge, there was much talk of “cutting your coat according to your cloth” and “looking after the pennies and the pounds will look after themselves” and suchlike.
And when the vicar was in charge, there was much more money about and, let’s be honest, the villagers generally found life easier. “Give and spend and God will send” was the message from the vicar.
So you would think that the vicar was elected to run Hope much more frequently than the squire. But that was not so.
Why? you ask.
Well, not so long ago, the vicar took charge of Hope for quite a few years. At the start, he was careful with the village’s money but, after a while, he began to spend. And spend. And spend. He gave the village hospital more money than they knew what to do with. And he made the village school his top priority. Unfortunately, neither the hospital nor the school was particularly well-managed. There were improvements but much of the money was wasted.
Worse still, because there were some improvements, the villagers got used to a better service and, although the better service had been paid for by borrowing - and therefore the village debt was increasing - the vicar was not prepared to cut back.
After ten years, the village had no money at all. The tax the villagers paid was nowhere near enough to maintain the hospital and the school, much less to support the poor. So the vicar gave up – or was voted out. When he left, he said to the squire; “It’s all yours”. By “all” he meant the debt because there was nothing else. The village was bankrupt.
The debt was a big problem.
First of all, the village had to pay a massive amount of interest every week. This meant it had to borrow even more to maintain the hospital and school and to help the poor because it had to fund the services and pay interest on the ever-growing debt.
Secondly, at some time, the village would of course have to repay the debt itself. And that had to mean hard times ahead for the villagers or their children.
So the squire decided to cut costs.
At once the vicar complained. After all his thoughts were with those who would enjoy less help from the villagers’ tax. If you remember “his heart was in the right place”.
“But the cuts in costs are direct result of your profligate spending,” the squire explained. “These are your cuts, not mine.”
“Not so,” said the vicar. “I wouldn’t make cuts. Why don’t you borrow more?”
“Because we are deep in debt,” the squire replied, “and if we carry on in this way, no one will lend us money or, if they do, the interest they charge will increase and our villagers will lose their homes.”
In fact, the squire did borrow more, not because he wanted to but because the villagers now expected a much higher level of service than the village could afford. So, even though the squire cut costs, the village’s debt increased, but at least at a much lower rate than when the vicar had been in charge.
After a few years, because the villagers had worked hard and the squire had cuts costs, the village accounts began to make sense one again and the squire said the time had come to borrow modestly to improve the village’s housing stock and roads.
“At last!” said the vicar. “I told you so.” And he devised a plan that he thought would make every villager happy. He promised to give every villager whatever they wanted free of charge. And none of this would cost the villagers a penny. He would increase taxes just a little on the better off but, in the main, he would borrow. As he said: “We must borrow for the future.”
“But you did that last time,” said the squire, “Indeed you do it every time you run the village. And the result is always the same. It’s years of hardship.” Then he added, because he saw a glint of fanaticism in the vicar’s eyes: “It is a sign of madness to do the same thing over and over again and expect a different outcome.”
“But I want to make everyone happy,” said the vicar. “And, in any case, most of the villagers blame you for the years of hardship.”
“But you and I both know the years of hardship are down to you, not me,” said the squire. “Despite the cuts I’ve made, we’re still borrowing more each year. Of course we both want everyone to be happy. After all, that’s how we get elected to run the village. But surely, as the fifth biggest village in Wonderland, we should be able to pay for what we need. If we keep on borrowing, we are condemning our village to generations of debt. Don’t you understand that our children and grandchildren will have to pay for all the “free gifts” you wish to hand out now. Throughout their lives, they will have to pay not just for your “free gifts” but all the interest on the money you want to borrow to pay for the “free gifts”. They will be damaged by your profligacy and, since you’ve made the mistake so many times before, by your persistent stupidity. Our children will have to change the name of the village from Hope to Despair.”
As you can guess, the squire was becoming angry, and that’s no way to win an argument. But it didn’t matter because, sadly, the vicar was now beyond reason.
And because the villagers knew, in their hearts, that there’s no such thing as a free lunch, they elected the squire more often than the vicar.
Not always, because everyone likes to be a bit silly from time to time. But more often than not, because they discovered that being silly has unfortunate consequences.