Debt certainly is being socialised in rich countries now, and as mentioned earlier, around the world it’s been a heavy chain for decades. Mark Braund’s book The Possibility of Progress gives a couple of examples that struck us; that nearly all of Indonesia’s then (2005) $80 billion debt is estimated to have been taken on by just fifty individuals; but now it belongs to everybody else, none of whom ever saw any of this money themselves. And post-apartheid South Africa started life with $18 billion of debt from the apartheid regime. Just two examples from around the world, every country has its own story about how its children came to be born in debt.
And socialising debt was going to get a lot, lot bigger in the rich world, and have we even reached the end of that? Perhaps it’s just the end of the beginning, to use Churchill’s words from a very different context.
Every round of quantitative easing that richer economies are seeing - that is, creating money - is socialising debt, and creating more debt to socialise.
Were these bailouts necessary in 2008? Eye-watering amounts of money were borrowed in our name to avert the unspeakable event of the banks crashing and taking the whole sector down with them. We managed to stave off disaster, we were told, yet it looks much more like a disaster than a disaster averted.
Why didn’t the government just let them fail? The government could have guaranteed deposits, and the rest of the bank could have gone out of business. The banks left standing would buy up the remaining assets of those banks. That’s what’s supposed to happen in capitalism, surely. No one seemed to, even for a moment, entertain the notion of letting them fail. Borrow £500 billion and instead of giving it to banks, distribute it to everyone; immediately there would have been new banks to hold this money. Those questions don’t come up.
Of course, it’s a simpleton question, the problem was they all would have been pulled down, all tied up together and everyone’s pensions were tied up in it. The option of letting these banks fail wasn’t even raised, let alone explored, or explained for the likes of us.
In a cursory glance around, there are professors of economics that say bailing out the banks at such huge cost was not necessary and achieved nothing. But, as far as we can tell, the question was never even raised within government or the media. Nobody even really explained what would actually happen if you didn’t rescue the banks and just let them crash and start again (with full reserve banking?)
Interestingly though, Iceland, mired in the financial crisis, and against whom Britain ludicrously used its anti-terrorist legislation in 2008, seem to have taken a quite different view. Iceland – the Icelandic people - decided not to protect creditors in its failed banks, and actually did let banks fail, and actually prosecuted bankers for their actions. And they restricted currency movements, in a climate where inevitably there would be speculative sharks lured by the smell of taxpayers’ money in the water.
Iceland actually disowned the debts. Icelandic politicians were attempting to subsume towering private sector debts into the national debt, but the Icelandic people just weren’t having it. The Icelandic government has supported its businesses and maintained its social welfare programme and seems to govern for its people.
Iceland took the view that business investments are gambles, which means you might lose. Isn't that what the UK should have done? The expectation now is that banks can take huge gambles to make huge returns, and if it goes wrong, their losses are socialised. Icelanders didn't see it that way, and they're right. The IMF says they’re doing really well now.
Elsewhere in the world, the massive private debt has been loaded onto the shoulders of the people. The price that is being paid for all this is enormous, millions of lives blighted, immiserated. Governments are frantically trying to stitch something together to make money markets feel confident. What seems to make financial markets happy and confident is news that the huge exposures that financial institutions have will be socialised. Who are these people that have the on-off tap on this money substance, who we need to make confident otherwise they’re not going to facilitate the world making a living? The world is here, the people are here, what stops people making a living?
It is another story of the Emperor’s New Clothes, but with no happy ending as yet. There’s obviously something very wrong, but it has become universally accepted that it can only be discussed in terms of orthodoxies that have been set in stone. It’s a sad thing, ordinary people like us wandering around having no understanding at all of what’s going on in the economics of the world because it’s been put beyond our ken, and maybe having to resort to conspiracy theories because it’s the only thing that fits.
It couldn’t possibly be a conspiracy, could it? It just looks so much like a plan that’s gone so well. The West ceases to garrison Third World nations to extort their resources, so the solution is to saddle them with a debt that they can’t repay, and then ramp up the repayments so that they are even more surely owned and exploited than in colonial days. And the hot money cycle had worked so well on the Third World, it was a grand time to apply it to the populations and social goods of the Western world? It’s preposterous that this could have been done with forethought, but it’s how it looks to the untrained eye. Because, whether with forethought or not, it’s produced precisely what the desired results of such a plan would be.
So, here we go with the full conspiracy theory thing: there’s a grand scam of breathtaking simplicity, prosecuted over centuries, maybe every economic recession is the seasonal shearing, suck up more wealth from the general population to the elite of the world. There’s a boom time, a couple of decades of fattening up the economy, then every so often there’s a crisis, a fleecing, and it’s easy to just appropriate the wealth that the general populace thought they had earned, and recalibrate what they can expect to get.
Print money, trade at interest, promote government debt, using governments as the agent to collect the debts of the people, and just keep printing more and more money. Create a crisis every few decades (when everyone’s forgotten the last one) and gradually thus acquire possession of . . . everything. Like the conclusion of a game of Monopoly.
Educate a cadre of economists, academics, journalists, politicians who understand only the inescapable logic of the great rewards that are available to them. Have them design the language, draw everyone into it, spread money everywhere. At the right moment, when the house of cards is high enough, extract cards, collapse it all, catch the tumbling cards as they fall, scoop them up later. Maybe. Or maybe now it’s beyond everyone’s calculations, maybe the whole debt-fuelled edifice has spun out of anyone’s control.
A close look is quite scary and would probably be a lot scarier if we had a better understanding of these things. The Great Depression of the 1930s was, as authoritatively claimed, caused by the Federal Reserve cutting the currency in circulation by a third between 1929 and 1933, and reportedly, by 2009, the world’s money supply had been cut almost in half in just 15 months of money mayhem. Where did it go?
Recently, Prime Minister Cameron wrote that red warning lights are flashing on the dashboard of the global economy
This is Susan George on austerity. As we write, austerity, like war, is starting to take on a feeling of permanence.
Just how did 85 people, a bus load, control as much wealth as half of the world? For decades, the proportion of the world’s wealth owned by the richest 1% has been steadily increasing, 44% in 2009, 48% by 2014. Oxfam’s research projects that by 2016, the wealthiest 1% of the world will own more than the rest of the world. How on Earth can that happen? It’s completely unreal. And it strikes us as quite irrelevant who these individuals are; there’s just products of a system, fulfilling their roles within it. We find we have no interest whatsoever in who they actually are.
We couldn’t calculate it, but there must be some critical point of wealth concentration after which it cannot help but subvert and distort the rest of a society’s life. It can’t help but follow the logic of its own being, and keep growing, and ever exploit the world around it to suit it, like any other organism, and with a power that increases with size.
Humanity is being milked by impersonal machine. And in the brief few months of reading about these things, we’ve come across it all the time, it’s always happened. President Jefferson saw it, President Jackson, Benjamin Franklin saw it, saw the logic of it, and many others across different eras that this recurrent nightmare of financial gloom has risen in. But now its grip is so much greater.
The machine drives on to the day when everything is mechanised, digitised, and every square inch of the world is owned, all of humankind will be redundant. As you’re born, you’re a debtor and a rent-payer. But who will have any money to buy anything? And if you don’t buy anything, you probably can’t exist. It will not stop until everyone are slaves to it, tied by bonds of unpayable debt to it.
And people can feel it but can’t see what it is that’s wrong. The traditional answers don’t work anymore, and actually never really did. People can see that there just is a group that always get richer. When we all get richer, they get richer, when we get poorer, they get richer, and gain an even bigger share of everything to be even richer going forward, the many more rents to collect. Just how did they get quite so much of it? Wealth and power becomes ever more concentrated, automatically, that’s clearly the working of a system. Within the top 1%, there’s a top 1% accelerating away. Maybe the top 1% within that and ad infinitum? It’s the logic of a mathematical meme we’re trapped in and need to find our way out of.
It seems akin to the workings of a black hole, there’s a central core of wealth with an irresistible gravity that inexorably pulls all other wealth and power to it. Does it all eventually become a singularity and fly into another universe? Or is it not as simple as that?