Learning to look after the pennies

Prepare pupils for our uncertain economic future by exploring debt and explaining the eurozone crisis, says Colin Hynson

Colin Hynson

Since the start of mass tourism in the 1960s, Greece has made money from its glorious ruins. But now that the country itself is in financial tatters, it is looking less at its past and focusing nervously on a highly uncertain future.

For the classroom, there is no better example of how we are embedded in a global economic system on the verge of collapse. The question is whether this is a short-term crisis or the start of something more profound in macro and microeconomic terms. Teachers are likely to find themselves in turmoil. How do you teach economics when many economic orthodoxies seem to be crumbling beneath our feet?

Although the two are not directly linked, the banking crisis of 2008 and the current sovereign debt crisis - especially in the eurozone - have forced a review of our economic systems. So what kind of economy is desirable?

In January this year, Prime Minister David Cameron tackled this issue directly in a speech where he defended the central tenets of a global economic system. But he added: "No true Conservative has a naive belief that all politics has to do is step back and let capitalism rip.Uncontrolled globalisation can slide into monopolisation, sweeping aside the small, the personal and the local."

It seems that the "greed is good" world of Wall Street's Gordon Gekko, with its implicit dependence on debt, is fading away.

All of this has implications for the way both national and personal economics are presented in the classroom. The old way is dying but the new is still struggling to be born. As the educationalist Ken Robinson once asked: "How do we prepare our children for a future that we cannot possibly predict?"

Perhaps one way forward is to encourage pupils to re-examine their own relationship with money, especially debt. At a European, national and personal level, debt has become a fact of economic life and one that, until recently, was regarded as essential for economic well-being. This was highlighted in October last year, when David Cameron had to alter a speech in which he was going to encourage us all to pay off our debts.

At a time when government spending was about to be cut, this would have been economically disastrous since our economy depends on our spending money and a large part of that comes from credit and store cards. Yet in Britain, we have cut back on our debts. In 2010, each household had, on average, debts of pound;16,000 (excluding mortgages). By the end of last year, this had shrunk to pound;7,500.

Ironically, however, under traditional ways of balancing the books, debt reduction creates a dilemma at both a national and personal level. Governments across Europe, especially in countries such as Greece, Ireland, Spain and Portugal, are cutting their expenditure to reduce their debts. This slows down and can even reverse economic growth. Yet if they do not reduce their debts, they will find it more difficult to raise new loans in the future, creating a vicious circle. Personal debt may have been a stimulus to the economy in the past, but it cannot be relied on any longer.

Ask your pupils about their attitudes towards debt. Do they believe that governments and individuals should spend more money than they earn (either through taxation or wages)? Look at who benefits from debt at both a macro and micro level. Given that debts have to be paid back eventually, is there a level at which debt becomes unsustainable and will actually begin to harm both borrower and creditor? How much debt is healthy and how do governments judge what that level is?

You can also make it personal. Ask pupils what they would be prepared to sacrifice to pay off their debts. Eurozone countries such as Greece and Italy had to agree to conditions on how their debts were to be reduced before the other countries in the European Union would bail them out. In Greece, this has resulted in riots. How would your pupils feel if their parents or carers paid off their debts, but then insisted on controlling not only how much they spent but also what they spent it on?

Of course, one solution for both individuals and countries with debt problems is to declare themselves bankrupt. This has been done before. Nine years ago, Argentina defaulted, which left billions of pounds' worth of unpaid debt, banks that had lent to it facing enormous losses and the country in financial meltdown. Many fear that Greece and other European countries may be heading in the same direction.

At first glance, bankruptcy can look appealing for the debt-ridden nation. But if Greece defaults on its debts, there could easily be a "contagion" effect across Europe. If Greece defaults today, then tomorrow it may be Spain, Ireland or Italy and that would make a bad situation much worse. Another issue is that it is mostly French and German banks that have lent money to the Greek government. Any default would hit them (and their economies) very hard. The money lent to Greece by the European Central Bank, therefore, will be used to ensure that these debts are honoured.

Pupils can explore what happens when any kind of debt is wiped away like this. The debts are still there, but they simply will not be paid. So where have the debts gone? They will be absorbed at a government level by financial institutions such as the International Monetary Fund or the European Central Bank and, on a personal level, by retail banks or building societies. But both countries and individuals will find it increasingly difficult to borrow money in the future. Would your pupils be willing to lend money to somebody who has been unable to pay them back in the past?

Just as with the economy, for a teacher it can be difficult to find a balance. You do not want to frighten pupils so thoroughly that they feel their future will inevitably be bleak. But if we cannot predict what is to come, we can at least try to prepare them for most eventualities. An economic future based on consumer and government spending, fuelled by a tolerant attitude to debt - a stance that arose in the US and Britain in the late 1980s - may no longer be a viable scenario. It can seem complicated, but you could ask your pupils to suggest more positive alternatives.

Colin Hynson is an educational writer and consultant. He has written more than 30 textbooks for children, including The Credit Crunch (Franklin Watts, 2009)

What else?

Do some further reading: try Paul Mason's Meltdown: The End of the Age of Greed (Verso, 2010) or Hannah Kovacs' Credit and Loans (Axis Education, 2007).

Visit www.debtbombshell.com to see the current amount of British government debt.

Check out Directgov's guide to dealing with personal debt at www.direct.gov.uk

And on page 45, TES reviews a new pack of lesson plans that can spark a heated debate about capitalism past, present and future.

Key stage 1: money matters

Recognising coins is the first step in gemvictoria's worksheets.

Key stage 2: euro purchase

Prepare for shopping in France with MadameShazaam's colourful language game.

Key stage 3: spender or saver?

Can your students manage their money? Find out with rhianrebecca's quiz.

Key stage 4: greed or good?

TrueTube asks what is more important in business - money or ethics.

Key stage 5: a little competition

Who has the stronger economy, Australia or Canada? Egypt or Brazil? Pit them against each other in Daniel Pullin's top trumps game.

In the forums

Have you any advice about a helpful financial education course? Why not share it?

Find all links and resources at www.tes.co.ukresources027.

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Colin Hynson

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