|Economist Hyman Minsky (1919-1996)|
Instability and crises ultimately drag down these economies because there is insufficient income to support the investment debt. Financing investment with debt when there is insufficient income to support it is obviously unsustainable. Eventually it reaches Ponzi levels where new debt is required just to support the interest on the old debt. As Michael Hudson likes to say, "debt that can't be paid won't be".
The alternative? Wages increasing in step with productivity will 'finance' consumption without transferring the nation's wealth to the financial sector.
This implies that the prime objective of government budgets should be full employment not 'balance'. This follows Abba Lerner's "Functional Finance" approach to using the nations monetary system for the benefit of the people. Of course, Lerner and Minsky held the "basic belief that both the government and the financial system exist to serve the private citizen, not visa versa." And so do I! I trust you would agree.
Whether the government budget then is in balance, deficit or surplus doesn't matter. It is a "result" of meeting the economy's needs, not the goal; whatever the result is it is immaterial when you understand how government finance functions. Deficits and so-called "debt" are not problematic when pursuing full employment and productivity goals.
Ultimately, it is always and only income which can support sales which support productive investment. Such a stable economic base for a nation also means a far more equitable distribution of benefits.
The above is based on a few select excerpts and summaries from the superb Levy Institute publication: