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Depression and Democracy
Paul Krugman, New York Times
It’s time to start calling the current situation what it is: a depression. True, it’s not a full replay of the Great Depression, but that’s cold comfort. Unemployment in both America and Europe remains disastrously high. Leaders and institutions are increasingly discredited. And democratic values are under siege.
… First of all, the crisis of the euro is killing the European dream. The shared currency, which was supposed to bind nations together, has instead created an atmosphere of bitter acrimony.
Specifically, demands for ever-harsher austerity, with no offsetting effort to foster growth, have done double damage. They have failed as economic policy, worsening unemployment without restoring confidence; a Europe-wide recession now looks likely even if the immediate threat of financial crisis is contained. And they have created immense anger, with many Europeans furious at what is perceived, fairly or unfairly (or actually a bit of both), as a heavy-handed exercise of German power.
Nobody familiar with Europe’s history can look at this resurgence of hostility without feeling a shiver. Yet there may be worse things happening.
Right-wing populists are on the rise from Austria, where the Freedom Party (whose leader used to have neo-Nazi connections) runs neck-and-neck in the polls with established parties, to Finland, where the anti-immigrant True Finns party had a strong electoral showing last April. And these are rich countries whose economies have held up fairly well. Matters look even more ominous in the poorer nations of Central and Eastern Europe.
(11 December 2011)
I agree with Krugman that the imminent danger is economic depression plus a lurch towards nationalist dictatorship. It will be impossible to make progress on climate and peak oil, if the political situation gets worse. -BA
Thomas Meaney, New York Times
The anthropologist David Graeber has a strong claim to being the house theorist of Occupy Wall Street. A veteran of the antiglobalization uprisings in Seattle and Genoa, he helped orchestrate the first “General Assembly” in New York this summer, and has since become one of the movement’s most outspoken defenders. For him, the encampments in cities across the country prefigure the kind of anti-hierarchical, stateless society that ought to be our future. In a recent opinion article in The Guardian of London, Graeber proclaimed OWS “the opening salvo in a wave of negotiations over the dissolution of the American Empire.” For a movement that has attracted an array of political sympathies, his voice reminds us that at its organizational core, Occupy Wall Street cleaves to anarchist principles.
But Graeber’s most important contribution to the movement may owe less to his activism as an anarchist than to his background as an anthropologist. His recent book DEBT: The First 5,000 Years (Melville House, $32) reads like a lengthy field report on the state of our economic and moral disrepair. In the best tradition of anthropology, Graeber treats debt ceilings, subprime mortgages and credit default swaps as if they were the exotic practices of some self-destructive tribe.
… That an anthropologist should feel obliged to assess the role of debt in modern society is perhaps no surprise. The discipline has always taken pride in undermining the assumptions of classical economics. In 1925 the French anthropologist Marcel Mauss published his classic essay “The Gift,” which argued that contrary to the textbook account of primitive man merrily trading beaver pelts for wampum, no society was ever based on barter. The dominant practice for thousands of years was instead voluntary gift-giving, which created a binding sense of obligation between potentially hostile groups. To give a gift was not an act based on calculation, but on the refusal to calculate.
… Picking up where Mauss left off, Graeber argues that once-prevalent relationships based on an incalculable sense of duty deteriorated as buying and selling became the basis of society and as money, previously a marker of favors owed, became valuable in its own right. The first interest-bearing loans originated in ancient Mesopotamia. Poor farmers would borrow from merchants or officials, fall into arrears, see their farms and livestock seized and, in many cases, their families taken as debt peons.
Thomas Meaney, an editor of The Utopian, is a doctoral student in history at Columbia University.
(8 December 2011)
What is Debt? – An Interview with Economic Anthropologist David Graeber
Philip Pilkington, Naked Capitalism
David Graeber currently holds the position of Reader in Social Anthropology at Goldsmiths University London. Prior to this he was an associate professor of anthropology at Yale University. He is the author of ‘Debt: The First 5,000 Years’ which is available from Amazon.
Interview conducted by Philip Pilkington, a journalist and writer based in Dublin, Ireland.
Philip Pilkington: Let’s begin. Most economists claim that money was invented to replace the barter system. But you’ve found something quite different, am I correct?
David Graeber: Yes there’s a standard story we’re all taught, a ‘once upon a time’ — it’s a fairy tale.
It really deserves no other introduction: according to this theory all transactions were by barter. “Tell you what, I’ll give you twenty chickens for that cow.” Or three arrow-heads for that beaver pelt or what-have-you. This created inconveniences, because maybe your neighbor doesn’t need chickens right now, so you have to invent money.
The story goes back at least to Adam Smith and in its own way it’s the founding myth of economics. Now, I’m an anthropologist and we anthropologists have long known this is a myth simply because if there were places where everyday transactions took the form of: “I’ll give you twenty chickens for that cow,” we’d have found one or two by now. After all people have been looking since 1776, when the Wealth of Nations first came out. But if you think about it for just a second, it’s hardly surprising that we haven’t found anything.
Think about what they’re saying here – basically: that a bunch of Neolithic farmers in a village somewhere, or Native Americans or whatever, will be engaging in transactions only through the spot trade. So, if your neighbor doesn’t have what you want right now, no big deal. Obviously what would really happen, and this is what anthropologists observe when neighbors do engage in something like exchange with each other, if you want your neighbor’s cow, you’d say, “wow, nice cow” and he’d say “you like it? Take it!” – and now you owe him one. Quite often people don’t even engage in exchange at all – if they were real Iroquois or other Native Americans, for example, all such things would probably be allocated by women’s councils.
So the real question is not how does barter generate some sort of medium of exchange, that then becomes money, but rather, how does that broad sense of ‘I owe you one’ turn into a precise system of measurement – that is: money as a unit of account?
… PP: Interesting. Perhaps this is a good place to ask you about how you conceive your work on debt in relation to the great French anthropologist Marcel Mauss’ classic work on gift exchange.
DG: Oh, in my own way I think of myself as working very much in the Maussian tradition. Mauss was one of the first anthropologists to ask: well, all right, if not barter, then what? What do people who don’t use money actually do when things change hands? Anthropologists had documented an endless variety of such economic systems, but hadn’t really worked out common principles. What Mauss noticed was that in almost all of them, everyone pretended as if they were just giving one another gifts and then they fervently denied they expected anything back. But in actual fact everyone understood there were implicit rules and recipients would feel compelled to make some sort of return.
What fascinated Mauss was that this seemed to be universally true, even today. If I take a free-market economist out to dinner he’ll feel like he should return the favor and take me out to dinner later. He might even think that he is something of chump if he doesn’t and this even if his theory tells him he just got something for nothing and should be happy about it. Why is that? What is this force that compels me to want to return a gift?
This is an important argument, and it shows there is always a certain morality underlying what we call economic life. But it strikes me that if you focus too much on just that one aspect of Mauss’ argument you end up reducing everything to exchange again, with the proviso that some people are pretending they aren’t doing that.
Mauss didn’t really think of everything in terms of exchange; this becomes clear if you read his other writings besides ‘The Gift’. Mauss insisted there were lots of different principles at play besides reciprocity in any society – including our own.
For example, take hierarchy. Gifts given to inferiors or superiors don’t have to be repaid at all. If another professor takes our economist out to dinner, sure, he’ll feel that he should reciprocate; but if an eager grad student does, he’ll probably figure just accepting the invitation is favor enough; and if George Soros buys him dinner, then great, he did get something for nothing after all. In explicitly unequal relations, if you give somebody something, far from doing you a favor back, they’re more likely to expect you to do it again.
Or take communistic relations – and I define this, following Mauss actually, as any ones where people interact on the basis of ‘from each according to their abilities to each according to their needs’. In these relations people do not rely on reciprocity, for example, when trying to solve a problem, even inside a capitalist firm. (As I always say, if somebody working for Exxon says, “hand me the screwdriver,” the other guy doesn’t say, “yeah and what do I get for it?”) Communism is in a way the basis of all social relations – in that if the need is great enough (I’m drowning) or the cost small enough (can I have a light?) everyone will be expected to act that way.
Anyway that’s one thing I got from Mauss. There are always going to be lots of different sorts of principles at play simultaneously in any social or economic system – which is why we can never really boil these things down to a science. Economics tries to, but it does it by ignoring everything except exchange.
PP: Let’s move onto economic theory then. Economics has some pretty specific theories about what money is. There’s the mainstream approach that we discussed briefly above; this is the commodity theory of money in which specific commodities come to serve as a medium of exchange to replace crude barter economies. But there’s also alternative theories that are becoming increasingly popular at the moment. One is the Circuitist theory of money in which all money is seen as a debt incurred by some economic agent. The other – which actually integrates the Circuitist approach – is the Chartalist theory of money in which all money is seen as a medium of exchange issued by the Sovereign and backed by the enforcement of tax claims. Maybe you could say something about these theories?
DG: One of my inspirations for ‘Debt: The First 5,000 Years’ was Keith Hart’s essay ‘Two Sides of the Coin’. In that essay Hart points out that not only do different schools of economics have different theories on the nature of money, but there is also reason to believe that both are right. Money has, for most of its history, been a strange hybrid entity that takes on aspects of both commodity (object) and credit (social relation.) What I think I’ve managed to add to that is the historical realization that while money has always been both, it swings back and forth – there are periods where credit is primary, and everyone adopts more or less Chartalist theories of money and others where cash tends to predominate and commodity theories of money instead come to the fore. We tend to forget that in, say, the Middle Ages, from France to China, Chartalism was just common sense: money was just a social convention; in practice, it was whatever the king was willing to accept in taxes.
PP: You say that history swings between periods of commodity money and periods of virtual money. Do you not think that we’ve reached a point in history where due to technological and cultural evolution we may have seen the end of commodity money forever?
DG: Well, the cycles are getting a bit tighter as time goes by. But I think we’ll still have to wait at least 400 years to really find out. It is possible that this era is coming to an end but what I’m more concerned with now is the period of transition.
The last time we saw a broad shift from commodity money to credit money it wasn’t a very pretty sight. To name a few we had the fall of the Roman Empire, the Kali Age in India and the breakdown of the Han dynasty… There was a lot of death, catastrophe and mayhem. The final outcome was in many ways profoundly libratory for the bulk of those who lived through it – chattel slavery, for example, was largely eliminated from the great civilizations. This was a remarkable historical achievement. The decline of cities actually meant most people worked far less. But still, one does rather hope the dislocation won’t be quite so epic in its scale this time around. Especially since the actual means of destruction are so much greater this time around.
PP: Which do you see as playing a more important role in human history: money or debt?
DG: Well, it depends on your definitions. If you define money in the broadest sense, as any unit of account whereby you can say 10 of these are worth 7 of those, then you can’t have debt without money. Debt is just a promise that can be quantified by means of money (and therefore, becomes impersonal, and therefore, transferable.) But if you are asking which has been the more important form of money, credit or coin, then probably I would have to say credit.
PP: Let’s move on to some of the real world problems facing the world today. We know that in many Western countries over the past few years households have been running up enormous debts, from credit card debts to mortgages (the latter of which were one of the root causes of the recent financial crisis). Some economists are saying that economic growth since the Clinton era was essentially run on an unsustainable inflating of household debt. From an historical perspective what do you make of this phenomenon?
DG: From an historical perspective, it’s pretty ominous. One could go further than the Clinton era, actually – a case could be made that we are seeing now is the same crisis we were facing in the 70s; it’s just that we managed to fend it off for 30 or 35 years through all these elaborate credit arrangements (and of course, the super-exploitation of the global South, through the ‘Third World Debt Crisis’.)
As I said Eurasian history, taken in its broadest contours, shifts back and forth between periods dominated by virtual credit money and those dominated by actual coin and bullion. The credit systems of the ancient Near East give way to the great slave-holding empires of the Classical world in Europe, India, and China, which used coinage to pay their troops. In the Middle Ages the empires go and so does the coinage – the gold and silver is mostly locked up in temples and monasteries – and the world reverts to credit. Then after 1492 or so you have the return world empires again; and gold and silver currency together with slavery, for that matter.
What’s been happening since Nixon went off the gold standard in 1971 has just been another turn of the wheel – though of course it never happens the same way twice. However, in one sense, I think we’ve been going about things backwards. In the past, periods dominated by virtual credit money have also been periods where there have been social protections for debtors. Once you recognize that money is just a social construct, a credit, an IOU, then first of all what is to stop people from generating it endlessly? And how do you prevent the poor from falling into debt traps and becoming effectively enslaved to the rich? That’s why you had Mesopotamian clean slates, Biblical Jubilees, Medieval laws against usury in both Christianity and Islam and so on and so forth.
Since antiquity the worst-case scenario that everyone felt would lead to total social breakdown was a major debt crisis; ordinary people would become so indebted to the top one or two percent of the population that they would start selling family members into slavery, or eventually, even themselves.
Well, what happened this time around? Instead of creating some sort of overarching institution to protect debtors, they create these grandiose, world-scale institutions like the IMF or S&P to protect creditors. They essentially declare (in defiance of all traditional economic logic) that no debtor should ever be allowed to default. Needless to say the result is catastrophic. We are experiencing something that to me, at least, looks exactly like what the ancients were most afraid of: a population of debtors skating at the edge of disaster.
And, I might add, if Aristotle were around today, I very much doubt he would think that the distinction between renting yourself or members of your family out to work and selling yourself or members of your family to work was more than a legal nicety. He’d probably conclude that most Americans were, for all intents and purposes, slaves.
PP: You mention that the IMF and S&P are institutions that are mainly geared toward extracting debts for creditors. This seems to have become the case in the European monetary union too. What do you make of the situation in Europe at the moment?
DG: Well, I think this is a prime example of why existing arrangements are clearly untenable. Obviously the ‘whole debt’ cannot be paid. But even when some French banks offered voluntary write-downs for Greece, the others insisted they would treat it as if it were a default anyway. The UK takes the even weirder position that this is true even of debts the government owes to banks that have been nationalized – that is, technically, that they owe to themselves! If that means that disabled pensioners are no longer able to use public transit or youth centers have to be closed down, well that’s simply the ‘reality of the situation,’ as they put it.
These ‘realities’ are being increasingly revealed to simply be ones of power. Clearly any pretence that markets maintain themselves, that debts always have to be honored, went by the boards in 2008. That’s one of the reasons I think you see the beginnings of a reaction in a remarkably similar form to what we saw during the heyday of the ‘Third World debt crisis’ – what got called, rather weirdly, the ‘anti-globalization movement’. This movement called for genuine democracy and actually tried to practice forms of direct, horizontal democracy. In the face of this there was the insidious alliance between financial elites and global bureaucrats (whether the IMF, World Bank, WTO, now EU, or what-have-you).
When thousands of people begin assembling in squares in Greece and Spain calling for real democracy what they are effectively saying is: “Look, in 2008 you let the cat out of the bag. If money really is just a social construct now, a promise, a set of IOUs and even trillions of debts can be made to vanish if sufficiently powerful players demand it then, if democracy is to mean anything, it means that everyone gets to weigh in on the process of how these promises are made and renegotiated.” I find this extraordinarily hopeful.
PP: Broadly speaking how do you see the present debt/financial crisis unravelling? Without asking you to peer into the proverbial crystal-ball – because that’s a silly thing to ask of anyone – how do you see the future unfolding; in the sense of how do you take your bearings right now?
DG: For the long-term future, I’m pretty optimistic. We might have been doing things backwards for the last 40 years, but in terms of 500-year cycles, well, 40 years is nothing. Eventually there will have to be recognition that in a phase of virtual money, safeguards have to be put in place – and not just ones to protect creditors. How many disasters it will take to get there? I can’t say.
But in the meantime there is another question to be asked: once we do these reforms, will the results be something that could even be called ‘capitalism’?
(26 August 2011)
Long article, but a MUST READ, in my opinion. -BA
Global rebellion: The coming chaos?
William I. Robinson, Al Jazeerea
As the crisis of global capitalism spirals out of control, the powers that be in the global system appear to be adrift and unable to propose viable solutions. From the slaughter of dozens of young protesters by the army in Egypt to the brutal repression of the Occupy movement in the United States, and the water cannons brandished by the militarised police in Chile against students and workers, states and ruling classes are unable to hold back the tide of worldwide popular rebellion and must resort to ever more generalised repression.
Simply put, the immense structural inequalities of the global political economy can no longer be contained through consensual mechanisms of social control. The ruling classes have lost legitimacy; we are witnessing a breakdown of ruling-class hegemony on a world scale.
To understand what is happening in this second decade of the new century we need to see the big picture in historic and structural context.
… Third, there will be no quick outcome of the mounting global chaos. We are in for a period of major conflicts and great upheavals. As I mentioned above, one danger is a neo-fascist response to contain the crisis. We are facing a war of capital against all. Three sectors of transnational capital in particular stand out as the most aggressive and prone to seek neo-fascist political arrangements to force forward accumulation as this crisis continues: speculative financial capital, the military-industrial-security complex, and the extractive and energy sector. Capital accumulation in the military-industrial-security complex depends on endless conflicts and war, including the so-called wars on terrorism and on drugs, as well as on the militarisation of social control. Transnational finance capital depends on taking control of state finances and imposing debt and austerity on the masses, which in turn can only be achieved through escalating repression. And extractive industries depend on new rounds of violent dispossession and environmental degradation around the world.
Fourth, popular forces worldwide have moved quicker than anyone could imagine from the defensive to the offensive. The initiative clearly passed this year, 2011, from the transnational elite to popular forces from below. The juggernaut of capitalist globalisation in the 1980s and 1990s had reverted the correlation of social and class forces worldwide in favour of transnational capital. Although resistance continued around the world, popular forces from below found themselves disoriented and fragmented in those decades, pushed on to the defensive in the heyday of neo-liberalism. Then the events of September 11, 2001, allowed the transnational elite, under the leadership of the US state, to sustain its offensive by militarising world politics and extending systems of repressive social control in the name of “combating terrorism”.
Now all this has changed. The global revolt underway has shifted the whole political landscape and the terms of the discourse. Global elites are confused, reactive, and sinking into the quagmire of their own making. It is noteworthy that those struggling around the world have been shown a strong sense of solidarity and are in communications across whole continents. Just as the Egyptian uprising inspired the US Occupy movement, the latter has been an inspiration for a new round of mass struggle in Egypt. What remains is to extend transnational coordination and move towards transnationally-coordinated programmes. On the other hand, the “empire of global capital” is definitely not a “paper tiger”. As global elites regroup and assess the new conjuncture and the threat of mass global revolution, they will – and have already begun to – organise coordinated mass repression, new wars and interventions, and mechanisms and projects of co-optation in their efforts to restore hegemony.
In my view, the only viable solution to the crisis of global capitalism is a massive redistribution of wealth and power downward towards the poor majority of humanity along the lines of a 21st-century democratic socialism in which humanity is no longer at war with itself and with nature.
William I. Robinson is a Professor of Sociology, Global Studies, and Latin American Studies, University of California at Santa Barbara. His latest book is Latin America and Global Capitalism.
(4 December 2011)
Suggested by EB contibutor Bill Henderson.