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Individual Paper: What is to be done about public debt?

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In the degrowth literature and movement much of the focus has been overwhelmingly on the immorality, and ultimately of the impossibility, of the current economic paradigm. This has clearly been a necessary task and one that probably and unfortunately still requires a lot of explanatory as well as political work. The premise of this economic paradigm has been largely captured through the idiom of growth which acts as the taken-for-granted, commonsense background imperative for any kind of activity to be considered plausible, sustainable, and also just plainly sensible. The continuous production of these magical things called commodities as well as the more illusory 'services' has been the rule of the game for the past 400 years or so. In a place like this, there is no need to preach to the choir about the insanity of this mentality. Instead, it is useful to point toward areas which are not actually that easily resolvable.

I wish to suggest that one such issue is the public debt. Public debt is in fact the reverse side of the 'growth' coin. Ever since the establishment of the Bank of England (which was actually preceded by entities like Casa di San Giorgio in Geneva) the role and function of the State has been dramatically transformed. Paraphrasing Karl Marx, the State has been alienated; its purpose has been subjected to the interests of the bankers who have effectively overtaken the oversight of its budgets by usurping the incredible power of controlling and manipulating the means of payment. The role of public debt cannot be underestimated - it is essentially a silent motive and an incentive for growth issuing from the central organ of a national society. One could go as far as saying - without such public debt, there would be no incentive for politicians to ever speak of growth. However, would it actually be a strategically smart move to engineer politics that try to do away with public debt? Especially, taking into account that the debt of the private sector is even more harmful?

Inspired by Hyman Minsky's analysis and the entire Levi Economics Institute it is safe to say that any growth led by investment in the private sector is simply untenable. It is so for many reasons, but mainly because the private sector debt becomes unsound after a certain threshold. Minsky has demonstrated this by arguing that 'stability breeds instability' and as the private sector borrows ever more money to continue to expand its activities, forced as it is by the coercive laws of competition, and as the repayment of debt is most often linked to the future production and successful realisation of this production, this borrowing leads inevitably to a downward spiral. The income of the private sector will always fall short of its debt commitments.

In my view, this actually presents enormous difficulties for the degrowth enthusiasts. It makes a lot of sense to try to articulate positions that curb the freedom of the private sector, because if this is not done, most of the world will actually turn into hellfire, however the logical thing would be to shift the burden of the borrowing on to the public sector (in fact as many new left movements across Europe, from Syriza to Podemos to Momentum in the UK are proposing to do). The debt of the public sector is actually much safer as it is based on taxing the population and the growth of the economy can be then driven by consumption rather than investment. However, if this is done - what does it mean for the degrowth movement? It's certainly a much more appealing position as it takes away power from invisible corporations. But it's certainly not a move away from 'growth' as such. In fact, it's not actually very clear what growth would look like in such a scenario when one inflates the public sector debt and deflates the private sector, reducing it to a new form of 'a nation of shopkeepers'. In essence, I am throwing out a challenge to the degrowth activists with these considerations about the ultimate politics of degrowth and is any form of degrowth ultimately possible if something like the State always lurks in the background.


Day: 2018-08-24
Start time: 11:30
Duration: 00:15
Room: ABF (Lilla sallen)
Track: Politics of Degrowth



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