If there is one issue more than any other which has been exercising the public consciousness for the past four years, it has to be the question of debt.
From the bursting of the US property bubble, the collapse of Lehman Brothers, and the systemic threat of a global banking failure in 2008, through the first measures taken by many governments, individually and collectively, to try to head of that danger, to the current, deep-seated crisis in the Euro-zone, the theme of debt – public and private – has dominated world thinking, doings and commenting constantly, obsessively.
With serious consequences for millions; whether dispossessed hopeless home-owners in the USA, pensioners in Greece, or the more than half of the Spanish population between 18 and 30 who are currently unemployed. The “markets” are uneasy and, apparently, when “markets” are uneasy, the little people worldwide suffer.
I am reminded of nothing so much as the stereotypes of fearful, primitive, superstitious civilisations in bad adventure novels, where the natives, threatened with the outbreak of catastrophe, are convinced that they have become victims of the anger of the gods. Indeed, the analogy can be developed farther, for the general reaction of the natives in such pot-boilers is to offer ever more and ever more costly sacrifices to these angry gods, to try to propitiate them, before finally reaching the inevitable ghastly conclusion that nothing less than the sacrifice of their own children will serve to (possibly) appease the divine anger.
Substitute markets for gods in the previous paragraph and you get a description of the world of 2012.
In the past couple of months, I have intended many times to write something about this theme here. The reason I have not, up to now, is that I have a deep suspicion that most of the discussions being carried out on the subject are based on misrepresentations, subterfuges, and downright cynical lies. I am prepared to accept that many of those involved are sincere and genuinely believe the arguments they are making – but I am becoming more and more certain that most of those who really matter know that much of what they are saying is no more than platitudinous window-dressing and that they well recognise, at a deeper level, what it is really about … the retention, protection, and even expansion of power and wealth in the hands of those who have it, whatever the cost to those who do not have it.
Writing over 2,400 years ago, the famous Greek historian, Thucydides, records how the more powerful Athenians expressed their view of the world to the weaker Melians on demanding their surrender, “the strong do what they can and the weak suffer what they must.” Since then, despite all kinds of declarations of rights and facades of agreements and legality, very little has changed.
There is a conventional view of the current ongoing global crisis and, on the basis of this view, it’s fairly easy to describe what’s going on. For various reasons – to which nobody pays much attention now – speculative trading of finance products got out of control. The result was a bubble which burst, the crash of a few financial institutions and the threat of a crash in the whole banking sector in 2008. To avert this, most sovereign states intervened, providing billions of tax-payers’ money to prop up the banks and keep the whole system going (or at least limping). The new atmosphere of sobriety and financial rectitude focussed increased attention on the deficits and borrowing debts of those sovereign states – deficits which had had to be drastically increased to provide the money to prevent the banks from failing. The “markets” became increasingly nervous about the dependability of those sovereign debts, with the result that costs of servicing such debt rose steeply for a number of countries, thus putting ever more pressure on their “real” economies, which weakened their position even further in the eyes of the markets. A vicious circle.
This problem became particularly acute in
where a large number of countries within the EU had adopted a common currency,
the Euro, over a decade ago. The euro had brought considerable prosperity for its
members – particularly those with strong export-based economies – by significantly
simplifying trade, both between its members and with the wider world. But it
also created a one-size-fits-all monetary situation for the member countries
and the pressures caused by the financial crisis exacerbated hidden fault-lines
enormously. Countries like Greece
and Ireland could
conceivably have eased their situation somewhat by currency devaluation, but
such devaluation was not in the interest of other countries such as Finland, Luxemburg,
Austria and, above all, . Ireland,
for example, could have let some of its banks fail and default, but, as these
debts were practically all held in Wall Street, the City of London and
Frankfurt thus potentially putting the powerful economies of the US, UK and
Germany under pressure, this wasn’t allowed either. The Irish were told to unconditionally
guarantee the debts of their – private – banks and the then Irish government,
terrified at the prospect of being otherwise abandoned by its international “friends,”
meekly complied. Germany
For nearly three years now, the Euro-zone has been trying to deal with a situation in which the debt problems (which have different causes in each country) in Greece, Portugal, Ireland, Spain and Italy are putting the common currency under continual pressures of all kinds on the markets, thus exposing all the other member countries to major risk. All sorts of imagery is used to describe what’s going on, the most popular one being that taken from the language of illness – the threat of “contagion.” Or the other hoary old image, beloved of proponents of the Vietnam War nearly fifty years ago, the “domino theory.” A full-scale collapse in Greece, or Spain, or Italy, would serve to knock down the economies of all the other Euro-members, even the strongest, and rapidly lead to world-wide economic recession and ultimate collapse, the scale of which would make 2008 look like an insignificant blip on the line of global progress.
and the world are under threat of economic Armageddon and the only way to stave
this off is to get the rampant sovereign debt problem somehow “under control.”
So there has been an ongoing series of frantic conferences, and bail-out measures, and stability mechanisms, and fiscal pacts, and injections of billions by the European Central Bank, etc., etc., etc. Three countries (Greece, Portugal and Ireland) have been put into a kind of international receivership and the domestic measures their partners (and the world in general, as represented by the IMF, which is one of the “receivers”) are demanding as conditions for their continual financial support, mean that their citizens – particularly their poorest citizens – are suffering badly. And the generally touted fear is that
Spain or could be next; in contrast to
the three already hospitalised patients, economies “too large to fail.” Italy
And still, despite all the measures taken so far, the mighty markets are still not impressed and the Euro members are divided on the question of what sacrificial offering might suffice to appease these gods and make them mild and gentle-mannered; even more austerity, measures to stimulate growth, Euro-bonds, the expulsion of Greece from the common currency …?
I am becoming increasingly convinced that all of this is just … pardon my French … bullshit.
I do not believe that it will be possible to solve the various problems besetting the global economy in any kind of enduring fashion using any of the various tools or mechanisms suggested, because the system is fundamentally broken. It has, in fact, been basically flawed all along, because it is based on axioms and assumptions which have no foundations, which have never applied, and which are nonetheless generally presented and accepted as being unquestionably true and self-evident.
Markets are natural and, in general, self-regulating.
The price of something is its value.
The basis of relations between people is one of exchange, with each party primarily pursuing his/her own (material) advantage.
Exchange usually makes everyone happy; everyone wins, nobody loses.
The fundamental principle of morality is that one should always pay one’s debts.
Our basic nature is one of lonely autonomy and our social relations and networks are secondary, conditional and ephemeral.
Everything is quantifiable.
Money “works” and can thus, somehow, increase itself.
Continuous growth is perpetually possible – even on a finite planet with, ultimately, limited resources.
These are the basic premises on which the so-called science of “economics” is based. They are all statements which can legitimately be challenged and, indeed, would be denied by most of us with respect to the way we live our everyday lives with families, loved ones, friends, neighbours, colleagues and communities.
How do you pay your debt to your parents, who gave you life and cared for you – not only materially – until you were able to stand on your own feet? How do you quantify kindness, or love, or beauty, or joy? Can you change your friends the way you change your socks? Is not a sincere “Thank You,” frequently a more than adequate payment for a favour/debt? Is monetary wealth really a measure of respect and regard? Do you always (or even usually) weigh up your own advantage before helping someone?
Yet, if economics – particularly the conventional economics upon which we seem to base our communal lives, as in my description of the current international debt crisis above – is an unquestionable science, then why does it not seem so easily applicable to our ordinary, real lives? It seems to me that there is a deep sort of schizophrenia present in the way we understand ourselves. If we really want to find solutions for the deep problems besetting our current global societies, I suspect this will only be possible if we find ways of surmounting this strange bifocal way of seeing things.
I am no utopian, no starry-eyed optimist. The current situation is the result of long, complicated processes, and concrete decisions will have very real effects on millions of people. Much as it might seem attractive, I don’t think we can just simply push some kind of “Reset” button. But I do see possibilities and potential for us, if we reflect on the way we see and understand things and are prepared to consider alternative ways of seeing and understanding them.
To admit, for example, that our various models of economic analysis may be deeply flawed and don’t provide us with an awful lot of good answers. To accept that economics, even as far as it goes, has very little basis in any of the basic moral principles which govern nearly everything we regard as important in our lives. To give this basic morality and decency the weight it deserves in our dealings, including our political and “business” dealings with each other, a weight far superior to simplistic “economic” considerations. To chose to do things, in the words of John F. Kennedy, “not because they are easy, but because they are hard.” But because they are truly worthwhile.
The questions I have been asking here crystallised, in part, for me after reading David Graeber’s Debt: The First Five Thousand Years. You don’t have to agree with all the author’s basic arguments to find this book compelling reading, but his analysis and the questions he asks will certainly open your mind to seeing things differently, above all, hopefully, to question the basic assumptions of the all-pervasive standard economics way of seeing things.
One final thought. The “Debt Crisis” can just as easily be called the “Credit Crisis.” The roots of the word credit are in the Latin word, credire, to believe. Credit is a basic fact of life, one of the fundamental things which keeps life going, on all sorts of levels. We believe each other, have faith in each other, trust each other, extend each other credit, in thousands of ways every day. Even on the level of conventional economics, trade, exchange, banking can only function at all on the basis of trust and faith. Yet, the whole world of the “markets” has abandoned this principle completely, and all those engaged in it seem to be operating on the principle that they are living in a vastly dangerous jungle, with every man’s hand raised against the other and where values like faith and trust are an immediate invitation to self-destruction. How sick is that?
It is no wonder, then, that the system is – possibly irrevocably – breaking down. Perhaps the first step forward would be to change our attitudes to all those involved in working in this area. Instead of admiring them as Masters of the Universe, or fearing them as powerful Priests in the Temple of the Gods of the Market, we should regard them with disdain and faint contempt; as sad and pitiable people, unfortunately condemned to work in an area where it is almost impossible for someone to work without losing their honour, their decency, and, ultimately, their basic humanity.
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