When we buy a house, we usually apply for mortgage from a bank. We own the house, the bank owns the mortgage. Put formally, we own the equity part and the bank own the debt part of the house. Being the debt owner, the bank care more about monthly mortgage payment, less about the conditions of the house, as long as the house is not being ravaged and the owners of the house do not abandon the house and stop payment. Being equity owners, we try to keep our house in good condition, both because we want to live in a nice house and we want a higher resale value. In general, a debt owner mainly interested in extracting a fixed income from the system and an equity owner wants to improve the system.
As a society, are we becoming more equity owners or debt owners? An important measure is the amount of government spending. A large part of government spending is allocated to social insurance and other fixed costs. Over the last century, overall government spending in the United States has increased substantially from about seven percent of GDP at the beginning of 1900s to about 40 percent of GDP today. The source of federal tax also changes a lot. Around 1950, corporate taxes accounted for about 30% and social insurance tax 10% of the total tax. Today, corporate taxes account for about 10% and social insurance tax 30% of the total tax. Government now taxes more on the cost side and less on the profit side of the society.
Investment advisors often recommend old people to hold debt securities and young people to hold equity securities. Old people mainly draw fixed income from the society and young people get whatever is left. So old people are more like debt owners and young people are more like equity owners. If a society has more young people, it will behave more like an equity owner. If a society has more elder people, it will behave more like a debt owner. In most Western countries, as well as China, average age of the society has been increasing over time.
From the above observation, Western countries, as well as China, become more and more like debt owners. That is why less and less people are concerned about the long term future of our society.
