Thursday, December 26, 2013

How to get out from the debt crisis ?

The American anthropologist and  activist  David Graeber  proposes a simple solution: cancel debt. Well, his book " Debt: the first 5000 years " published in 2011 (Melville House)  is worth reading for the deep historical research and original ideas. 

His thesis is that cancelling partly or wholly public and private debt has been recurring in history of societies over the last 5000 years. Adam Smith said , a few centuries before, that no State had never repaid its debts. Why should this time be different?  Graeber argues that  this solution would be preferable to offset rising inequalities rather than introducing a set of tax measures on the rich. . But in his view, this will imposed through debtors' action or movements (such as Occupy Wall Street in the US) not by public institutions.  

The partial debt write off (or 'haircut') imposed by the Troika in March 1992 is somewhat different from what Graeber has in mind. This forced agreement has been conditional to severe austerity measures which constitute a grave violation of economic, social and civil rights of the Greek people. It has in fact worsened the economic situation of Greece while allowing foreign banks (mainly French and German) to limit their losses and Greek banks being recapitalized at the expense of the Greek Treasury . The Greek public debt represented 130% of GDP in 2009 and after the 'haircut' reached another peak in 2013 at 175%! The unemployment rate rose from  12,6% in 2010 to 27% in 2013 (reaching more than 50% for the young unemployed). In the meantime, the Troika has durably reinforced its domination and Greece' loss of  sovereignty has paved the way for the rise of far right extremism. Who will pay for these mistakes? Debt write off or payment suspension has to be decided by the debtor country unilaterally to give some relief (as Argentina did between 2001 and 2005 and Ecuador in 2008-09).  

The debate on inequality has revived recently and as Krugman said (using the words of Pdt Obama) it has become "the defining challenge of our time". Experts like Th. Piketty will argue that the main political goal is to address the issue of wealth inequality rather than public debt. He is right but there is also an issue of private debt which is far more important because of  loss of middle classes income and unemployment increase and its dramatic rise during the crisis is also largely explained by the conversion of private debts, primarily of banks into public debts.   
We are talking about a more fundamental problem which affects the entire economic system. Measures such as capital taxation, write off of illegitimate debts and more progressive taxation on high incomes are just part of a plan designed to  change the current economic model. Such a program  which should have a genuine European dimension, should include the abandonment of austerity policies, the reduction of working time and wage increase for low income workers, a public service oriented reform of the banking sector, a global tax reform, more equality of opportunity for women and migrants in particular as well as  public measures to foster the transition to a low carbon economy. 
Graeber puts a strong emphasis on debt cancellation as a mobilizing goal, but he acknowledges that this measure will not suffice to promote a radical change. Taxing capital to redistribute wealth is a valuable goal to safeguard democracy.  We all aspire to a better and more equitable sharing of wealth , but  these will not fundamentally change the nature of the current economic system which does not respect people nor public goods and accelerates inexorably the destruction of our planet. 
The current crisis has revealed the predatory nature of the financial system. Given its overwhelming control on the state of affairs, can we realistically imagine that any government or any supranational institution such as G-20 will decide on the introduction of a global tax on capital ?  As Bob Dylan said  " the answer, my friend is blowing in the wind". 

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