German Economic Review, Vol. 15, Issue 1, pp. 191–207.
In this study, I draw on recent comparative studies of the macroeconomic history of advanced economies since 1870. I show that while both public and private debts have increased markedly, private, not public debts have climbed to historically unprecedented levels. Outside war times, financial crises have typically originated in the private sector, yet the costs have increasingly been socialized. The historical record shows that modern democracies have been relatively successful in managing their financial affairs, evidenced by a systematically positive response of primary balances to high debt ratios.