London Review of Books: 'Debt: The First 5000 Years' and 'Paper Promises'

[muriel_volestrangler]

A review of 2 books on debt. 'Debt: The First 5000 Years' by David Graeber has been discussed on DU already; 'Paper Promises: Money, Debt and the New World Order' by Philip Coggan hasn't, as far as I can tell.

The review is long; here's the end of the section about 'Debt', but there's a lot more about debt and money in previous eras, and about what might be done next by a government seeking to help the 99% again:

For Graeber, our own time has so far been distinguished by a return to virtual money and the preservation of its value by force of American arms: ‘The new global currency is rooted in military power even more firmly than the old was.’ But, as Graeber himself shows, capitalist money has not consistently adhered to a metallic norm. Even Britain, stalwart of the gold standard, didn’t adopt the measure until 1717, and an international gold standard dates only from the last third of the 19th century. Capitalism before our time also saw the riotous printing of paper money. And even when society-wide binges on credit money inspired chastened retreats to bullion, gold or silver served chiefly to measure and stabilise prices rather than – through coins – to facilitate exchange. In this sense capitalist currency has not been much less virtual than Mesopotamian credit, also indexed to metal. Not only did capitalist powers typically suspend the convertibility of their paper during wartime, but even at the Belle Epoque zenith of the gold standard, international money remained a kind of conjuring trick. Before 1914, as Coggan notes, ‘Britain’s gold reserves rarely exceeded £40 million, a figure that was only 3 per cent of the country’s total money supply … Had foreign creditors demanded the conversion of their claims into gold, Britain could not have met the bill.’ After the war, and the fitful return to gold, Keynes argued that it no longer made sense to distinguish between ‘commodity money’ and ‘representative money’, or the metallic and the virtual. Gold, having ‘ceased to be a coin’, had become ‘a much more abstract thing’, with at most a vestigial part in the regulation by central banks of ‘managed representative money’. Graeber wouldn’t dispute this – he continually emphasises that money is always a political, never a truly mineral phenomenon – but it does put in doubt the usefulness of differentiating capitalism from prior social formations or sorting out eras within its history according to the role of bullion.

Graeber’s emphasis on American imperial might in preserving contemporary monetary arrangements also creates an appearance of continuity just where he proposes a border. If state violence inaugurated and maintained capitalism before 1971, can the same factor set apart the decades since then? The anarchist identification of the state with violence risks becoming more axiomatic than analytic. Graeber describes the assembly over recent decades of a ‘giant machine designed, first and foremost, to destroy any sense of possible alternative futures’. The inculcation of hopelessness rests on ‘a vast apparatus of armies, prisons, police, various forms of private security firms and police and military intelligence apparatus and propaganda engines of every conceivable variety, most of which do not attack alternatives directly so much as create a pervasive climate of fear, jingoistic conformity and simple despair’. The blurring here of instruments of coercion and techniques of consent, of armies and advertisements, itself reveals the need for a more complex account of the way contemporary capitalism secures – if with diminishing success – the acquiescence of the governed and the punctual remittances of the indebted.

The most striking aspect of the current era is that it emerges as the rare period of virtual money that has so far failed to set up strong protections for debtors, whether in the form of bans on predatory lending or periodic jubilees: ‘Insofar as overarching grand cosmic institutions have been created that might be considered in any way parallel to the divine kings of the ancient Middle East or the religious authorities of the Middle Ages, they have not been created to protect debtors, but to enforce the rights of creditors.’ The IMF is Graeber’s main example, to which the European Central Bank and the Federal Reserve could be added. The response of Western officials to the economic crisis, with its proximate cause in unsustainable consumer debt, has been to ensure that banks suffer as few losses as possible, while relying on the same indebted consumers – in their role as taxpayers – to keep the bankers whole. The Fed and now the ECB have loaned banks money at virtually no cost, encouraging those same banks to purchase government bonds paying much higher rates of interest: a direct subsidy of finance by the public, while millions sink into unemployment and bankruptcy. A far simpler and more effective monetary policy would have been for the government to print a new batch of money, distribute an equal amount to everyone, then sit back and watch as stagnant economies were stirred to life by the spending and debts were paid down and eroded by temporarily higher inflation. The inconceivability of such a policy is a mark not of any impracticability, but of the capture of governments by a financial oligarchy.

http://www.lrb.co.uk/v34/n09/benjamin-kunkel/forgive-us-our-debts

The conclusion:

The political suggestiveness of spontaneous self-organisation – of protests, assemblies and encampments – can’t be denied. These practices have reminded thousands of activists that society itself, all appearances to the contrary, is the active creation of its constituents. But the stress on direct action and face-to-face assembly has also threatened to circumscribe, rather than inspire, a developed programme for the left, as if the impersonal institutions of money, banking and government had been too badly tainted by long collusion with oppression to be salvaged. Yet, assuming that we aren’t about to see a swift unravelling of the contemporary world into a far lower degree of complexity, the left will need to imagine and propose credit systems and monetary authorities that can prise apart debt and hierarchy, exchange and inequality. Money, and therefore debt, is always an abstraction. But justice too can be abstract, and there is no reason in principle why money and debt must serve injustice rather than justice. So long as we still resort to markets and banks, the words of (the socialist) George Bernard Shaw are worth keeping in mind:

The universal regard for money is the one hopeful fact in our civilisation … It is only when it is cheapened to worthlessness for some, and made impossibly dear to others, that it becomes a curse … Money is the counter that enables life to be distributed socially … The first duty of every citizen is to insist on having money on reasonable terms.