Group items tagged

Focusing on student loan debt too easily slides into the language of attacking higher education already prominent on the right.

The construction of debt as a problem can easily elide with right-wing attacks on deficits, the national debt, too much government spending, etc. The mistake is to treat government debt as the same thing as individual and household debt, and vice versa. 

when we contrast debtors with proletarians: the former consume, the latter produce. Admittedly, in the face of CDOs, debts become a kind of production--but it's fake, empty, a ponzi scheme, production without production. 

The most pressing common issue in the present is climate change. This affects everyone. The rich are currently dispossessing the people of our collective wealth, positioning themselves so that they are mobile, comfortable, defended, impermeable.  The rest of us will face the ravages of weather, drought, flood, famine, shortages, disease. The only way to deal with any of this is collectively -- beginning from the premise that food, shelter, health, and knowledge belong to all in common. Anyone who thwarts this is an enemy of the people.

A politics that focuses on debt seems to treat people as failed capitalists -- even if debtors are not shopaholics or spendthrifts, that is, even if debt is a matter of self-investment, or purchasing in order to benefit one's self, children, household, the model seems too close to the one that treats people as human capital, the homo economicus of liberal and neoliberal theory.

Debt is the tie that binds the 99 percent. Almost everyone in the United States is a debtor of some sort. Even those excluded from mainstream credit systems are still preyed upon by lending institutions, exemplified by payday loan sharks and pawn shops that dot poor neighborhoods. Rather than a supplementary facet of the overall economy, the personal debt system is a primary engine of Wall Street profits, and it is prone to crisis.

Looming over these discussions of debtors’ movement has been the question of a debt strike, a deliberate withdraw of consent by debtors from the system designed to keep them paying in perpetuity. Millions already do not and cannot pay their debt anyway, and are by default on strike. These de-facto debt-strikers constitute what has been described as an “invisible army of defaulters” with massive political potential. Debt strike — or debt refusal, as OCSDC describe it in an online pledge — is a significant alternative to the notion of debt forgiveness, which has been advocated by some groups rallying around the Student Loan Forgiveness Act. In the words of OSDC member Christopher Casuccio:

An intriguing mutual aid pilot project is the idea of a “debt fairy” campaign in which groups of private citizens would pool their resources to purchase defaulted debt for pennies on the dollar from banks — who typically sell to collection agencies — liberating the debtor from their burden. While not a structural solution — and not applicable to student loans — scaled up it could become what David Graeber imagines as a “moving jubilee” capable of both garnering media attention around debtors’ struggles and taking business away from the intermediary companies that profit from hounding and penalizing those unable to pay.

If debt is a gateway into a radical conversation about the capitalist system itself, strategic and analytical questions arise about the role of the state — questions that have always haunted OWS as a movement grounded in anarchist principles. What can we learn from the debt cancellation forced upon the Icelandic government by citizens earlier this year? How do we connect the dots between “personal” debt and the public debt of municipalities and governments subjected to corporate bondholders and credit-rating agencies?

While it remains to be seen on what terms OWS will collaborate for S17 with its allies in the “99% Opposition” on the institutional left — ranging from the groups gathering for the Student Power Convergence in August to the 99% Spring network, to May Day partners such as SEIU — there are signs of an emerging consensus across the spectrum of the left that debt, and especially student debt, is a key note to hit for a longer-term vision of social and economic renewal. While some will attempt to yoke the energies of S17 to the timeframe of the electoral cycle and ultimately the established mechanisms of the state, OWS will push back with its own sense of time and priorities.

Graeber’s alternative is to recognize the diversity of motives that guide people’s economic interactions. He proposes that there are three “main moral principles” at work in economic life: communism, exchange, and hierarchy.

but principles of interaction present in all societies in different proportions: for example, capitalist firms are islands of communism and hierarchy within a sea of exchange.

The most simplistic renditions of neoclassical economics may reduce all human interactions to self-interested exchange. But the idea that society is made up of different but interdependent levels is hardly new in social theory. Neither is Graeber’s view that to talk of a society as a unit may be misleading, since people are involved in social interactions across multiple horizons that may not fit together into a coherent whole.

The greed of the Europeans is contrasted with the inscrutable warrior honor of Moctezuma, who would not object when he saw Cortés cheat at gambling. Also, Cortés and his fellows were drowning in debt, and so was Emperor Charles v, who sponsored his expeditions.

English villagers were quite happy with market transactions in their place, as part of a moral economy of mutual aid.

It is, rather, the story of how an economy of credit was converted into an economy of interest; of the gradual transformation of moral networks by the intrusion of the impersonal – and often vindictive – power of the state.

For Braudel, capitalism is the domain of the big merchants, bankers, and joint stock companies that feed off the market and reorganize it. For Graeber, the easiest way to make money with money is to establish a monopoly, so “capitalists invariably try to ally themselves with political authorities to limit the freedom of the market.”

In place of a materialist economic history, Graeber’s 5,000 years are organized according to a purported cycle of history in which humanity is perpetually oscillating between periods of “virtual money” – paper and credit-money – and periods of metal money. The emergence and rise of capitalism up to 1971 has to be shoehorned into this quasi-mystical framework as a turn of the wheel back toward metallism.

What do these units of measurement measure? Graeber’s answer is: debt. Any piece of money, whether made of metal, paper, or electronic bits, is an iou, and so “the value of a unit of currency is not the measure of the value of an object, but the measure of one’s trust in other human beings.”

et it doesn’t seem to have made much difference to monetary theory. Texts have no problem acknowledging that money is not a commodity, and then going on to claim that money exists because barter is inefficient.

The reason, to be blunt, is that unlike Graeber’s critique, not much of monetary theory itself rests on the historical origins of money. Economics deals with the operation of a system.

As for arguments that money is essentially about debt, or essentially a creature of the state: this is to make the mistake of reducing something involved in a complicated set of relationships to one or two of its moments. Economics has generally met the challenges of credit and state theories of money not with fear or incomprehension, but with indifference: if credit or the state is the answer to the riddle of money, the wrong question may have been posed.

But to call its value a social convention seems to misrepresent the processes by which this value is established in an economy like ours – not by general agreement or political will, but as the outcome of countless interlocking strategies in a vast, decentralized, competitive system.

But however far credit may stretch money, it still depends on a monetary base: people ultimately expect to get paid in some form or other.

Graeber’s general reading of Smith’s worldview is quite tendentious: Smith was blind to the flourishing credit economy of mutual aid all around him, had hang-ups about debt, and “created the vision of an imaginary world almost entirely free of debt and credit, and therefore, free of guilt and sin.” The gold standard was a strategy by the powerful to undermine the informal rustic credit economy.

The value of gold acted as an anchor for the value of any currency convertible into it. This was not due to any inherent goldness to money, and people didn’t have to believe in any such thing to support the gold standard. There was a big difference, as Schumpeter put it, between theoretical and practical metallism, a difference which does not register in Graeber’s picture.

In the modern period, state after state committed to metallic anchors as strategic decisions to enhance trust in their national currencies.

The ultimate killer of the gold standard in the twentieth century was not changing minds about the nature of money, but the rise of the labor movement and collective bargaining: deflations became more painful and politically unacceptable.

Pierre Berger, a French economist responding to a previous incursion by the anthropologists, wrote in 1966: “With no disrespect to history, one is obliged to believe that an excessive concentration on research into the past can be a source of confusion in analyzing the present, at least as far as money and credit are concerned.” He meant that economics studies a system, and the origins of its parts might mislead about their present functions and dynamics.

The Greek labour minister, Louka Katseli, is thought to be sympathetic to the idea and support is growing across the political spectrum, say drafters of the call for an audit commission, with MPs expected to raise the proposal in parliament in the coming days.

Meanwhile, the global take home pay for workers continues to go down in real terms (ie in relation to people's bills) and go down in relation to the amount of money we can call profits. So simply put, the vast majority of people have less money to buy the goods that the capitalists would make and try to sell, if they could. The main pressure downwards on pay comes from government initiated pay freezes, unemployment, part-time, short-term employment and lack of union organisation to resist this pressure.

In my dream world, Labour would be saying all this. They would be spelling it out with diagrams, films, and leaflets. They would be showing that a tiny group of people held and are still holding the world to ransom on account of their speculative lunacy and greed. They would be showing that each time Osborne and all the press pals say that it's the deficit that's the problem they would say, Oh no it isn't, it's the private debt. Every time Iain Duncan Smith and his press pals point the finger at this or that 'benefit cheat' or 'welfare dependent underclass', Labour would point the finger at the vast debts seizing up the system causing much more damage than a few people working a small time racket. They would point the finger at the vast millions people earn who manage these debts and who are of no productive use whatsoever. They are parasites. And they would talk about the greed-dependent overclass who got us into this fix. 

As the national week of mourning continues, church leaders have spoken out against Lonmin and students at Wits University in Johannesburg are set to march. A national inquiry into the events has already been established but it is not clear if the ANC can contain the wave of radical protest the massacre has set in motion. Malema may be an opportunist, as some charge, but the grievances he articulates are all too real.

Sarkana was right, only he did not go far enough. The reconquest forced by the combination of debt and mining was not just of Africa: it was planetary. So are the consequences. Let’s hope that his heirs in South Africa can begin the resistance.

In 1982 the IMF lent Mexico $4 billion, which went straight back out of the country to pay western banks - a perfect mirror of what is happening with so-called bail-outs to Greece and other Eurozone countries today.

Former Colombian Finance Minister Jose Antonio Ocampo calls the bail-out responses "an excellent way to deal with the US banking crisis, and an awful way to deal with the Latin American debt crisis".

Then as now, bailout money was used to repay reckless banks, whilst austerity has served only to shrink economies and increase the relative size of the debt.

The future of Europe’s economy, indeed the world economy, will be decided by a battle between the financial masters on the one side, and the peoples of the most indebted states in Europe on the other - Greece first. We either retake control of our economy from the banks, or we deepen an economic experiment which has had an incalculable cost in terms of the lives and livelihoods of millions of people.

The spider web of financial connections in today’s global financial system is still not well understood. Estimating the potential psychology of investor responses is almost impossible.

Despite all this, arrogant German, Dutch, and other technocrats and bankers intent on retaining the old order of austerity and debt payments in Greece continue blindly to insist on more of the same, when it is clear that the Greek people and, hopefully its government, will refuse to continue with ‘business as usual’.

All things considered, Alexis Tsipras is wrong on Ukraine. The fact that EU policies have had such a destabilising effect on the country, and that even today the EU is not offering anything like adequate aid, are not sufficient to justify Russia’s annexation of the Crimea and its support for separatists in the East.

Whatever one’s take on dependency theory, it should be self-evident that no democratic country can support running primary surpluses of up to 5% of GDP over decades, as called for by the Memorandum, when over 25% of its population is unemployed, poverty is endemic and the productive base of the country has been ravaged. Given similarities to economic conditions during the Great Depression, the EU should consider the victory of a democratic party like SYRIZA a relief. Still, it remains a source of surprise that the EU did not move to link debt reduction to GDP growth before April of 2014, in other words before the Euro elections, when such a move might more easily have been coupled with accelerating the pace of the structural reforms that are needed to strengthen Greece’s private and public sectors. 

It is already exposing Greece to criticism. But can Greece’s economy – in particular its banking sector – survive such brinkmanship on all fronts for even a short period of time?

it is a bit geographically challenging to describe it as the development bank of the ‘South,’ given that Russia is one of the founding members; the largest founding member is entirely north of the Tropic of Cancer except for a tiny sliver (China); and a third was entirely north of the Equator the last time I checked a world map (India).

Many predict or at least hope that the new lending institution will improve the access of middle and low-income countries to financing for infrastructure.

 If the BRICS bank can operate less bureaucratically than the World Bank, that would be a substantial gain in itself.

why is it necessary for countries to borrow to build, for example a new airport? The problem is never ‘money.’  Any government of a country that has its own currency can borrow from the central bank (this would not apply to the 14 members of the West and Central African currency zones). Only one reason comes to mind about borrowing from abroad: that the project may require substantial imports of materials. Thus, the purpose of the borrowing is to obtain US dollars, yen, renminbi, etc.  

is this Gang of Five likely to shift international lending in a more humane and flexible direction as Oxfam hopes?  We should note that the voting proposal for the BRICS bank follows the IMF/World Bank model – money votes with shares, reflecting each government's financial contribution. The largest voting share goes to China, whose record on investments in Africa is nothing short of appalling (see my discussion of Chinese capital in Zambia).

Much better than a project bank for the ‘South’ would be an institution providing long-term loans in foreign currencies. This would have several major advantages over the BRICS bank as envisaged. First, the loans could be made on the basis of a judgment about the ability of the government to repay, not a narrow assessment of a specific project. This rather difficult judgment is the de facto basis of all loan repayment – can the country's export sectors generate the foreign exchange to service the debt? Second, the borrowing country's external debt would increase by the foreign currency component of the project; the rest would be financed domestically. This arrangement would be in line with the famous advice of John Maynard Keynes in 1933, ‘let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national’ (emphasis added). 

The suspicion uppermost in my mind is that the purpose of the BRICS bank, as a project funding bank, is to link the finance offered, to the construction firms and materials suppliers located in the BRICS themselves. Certainly, the Chinese Government is notorious for doing this (see 'China insists on "tied aid" in Africa').

Venezuela is not suffering from a genuine balance of payments crisis, where insufficient export revenue makes it impossible to pay for imports and service the public foreign debt. The country is running a current account surplus, and has a more than adequate $40 billion in total foreign exchange reserves (including government funds outside the Central Bank). What looks like a balance of payments crisis is really just a dysfunctional exchange rate system generating artificial shortages of dollars and goods, as well as payment arrears.

the ones who must be protected are working and poor Venezuelans who will face some price increases—instead of the current scarcities—after the devaluation.

They scarcely existed five years ago but now they look like credible candidates to exercise power; and they may be able to relegate their countries’ socialist parties — which share responsibility for the general financial disaster since 2008 — to a supporting role, just as Britain’s Labour Party supplanted the Liberal Party, and France’s Socialist Party supplanted the Radical Party (3). Those changes were permanent.

In Athens, that nowhere is all too clear. But austerity’s cruelty, with social and health consequences extending to hunger, cold and increases in infectious diseases and suicides, does not necessarily mean a change of policy (4). Austerity’s architects are well paid to have nerves of steel.

Syriza has calculated precisely that free electricity, public transport, emergency food for the poorest and vaccines for children could be financed through more aggressive anti-corruption and anti-fraud measures. The outgoing conservative government admitted that these deprived the public coffers of at least €10bn a year.

These measures are not up for negotiation with other parties or the country’s creditors, Milios insists: “They are questions of national sovereignty; they won’t add anything to our deficit. We are therefore intending to implement this policy whatever the outcome of debt renegotiations.”

In these circumstances, the European conference on debt that Tsipras called for two years ago in this publication (6) could become a realistic prospect. Ireland’s finance minister backs the idea, and it has a historical precedent in the 1953 conference that cancelled Germany’s war debts, including what it owed to Greece. Syriza hopes the conference it is calling for will provide “the alternative solution which will bury austerity for good.”

Merkel has threatened Greece with expulsion from the euro if its government breaks the budgetary or financial disciplines to which Germany is so attached. The Greeks want both to loosen austerity policies and to remain in the single currency. Those wishes are shared by Syriza (8), because a small, exhausted country cannot fight on all fronts at once. “We’ve been the troika’s guinea pigs. We don’t want to become the guinea pigs for a euro exit,” says Valia Kaimaki, a journalist with links to Syriza. “Let a bigger country, such as Spain or France, go first.”

Moulopoulos believes that “without European support, it will not be possible to do anything at all.” That is why Syriza accords importance to support from forces beyond the radical left and the Greens, in particular the Socialists. Yet the Greeks have had experience of the surrenders made by social democracy since Andreas Papandreou forced his party to make a major shift towards neoliberalism 30 years ago. “If he had stayed on the left, there would have been no Syriza,” says Moulopoulos. “In Germany too, when Oskar Lafontaine resigned from the government [in 1999], he expressed regret that social democracy had become incapable of even the most insignificant reforms. Globalisation and neoliberalism with a human face completely destroyed it.”

Electoral victory for Syriza, or for Podemos in Spain, could demonstrate, contrary to what Hollande or Matteo Renzi in Italy say, the viability of a European politics that rejected austerity. That would challenge more than the German right.

Now the threat is much greater. “If we don’t change Europe, the far right will do it for us,” Tsipras has warned. It has become even more urgent to be bold.

The task for the left in Greece and Spain, on which much depends, is hard enough without adding onto their shoulders the heavy responsibility of defending Europe’s democratic destiny, and averting a “clash of civilisations”. But that is what is at stake.

Spain and Ireland who had not been profligate borrowers. They had been running budget surpluses before the crisis. This was entirely a story of reckless lenders in Germany and elsewhere making bad loans to the private sector in these countries. Yet, the austerity policies being imposed ensure that the people of Spain and Ireland suffer even if the pain is not quite bad as in Greece.

The time has come for the European Union to stop running economic policy based on silly myths. If German Chancellor Angela Merkel and other leaders in the European Union cannot accept reality then Greece and southern Europe would be far better off breaking free of the euro and leave Germany to wallow in its 19th century economic fairy tales.