New Adventures in Debt Oligarchy

With faint rumblings of discontent in Ireland, in some circles at least, about how the fate of David Norris’s presidential bid was kept out of the hands of the electorate, there are deeper considerations underway across Europe regarding the prospects for democratic life in the continent beneath the shadow of a predatory financial system. 

It is not that Norris’s departure from the presidential race (of which, more in a later post) is of no importance: on the contrary, it serves to highlight the gap between a public capable of actively deciding what it wants, and media and political establishments that take it upon themselves to decide what is best for the public.

Whilst the power of the position sought by Norris is largely symbolic, the simple fact that the public can not even be allowed to decide on this, should ideally serve as a starting point for critical reflection, by the public, on who really exercises decisive power in Irish society.

Of course I say ‘ideally’ somewhat idealistically. Those of a more realistic inclination might begin their critical examination of decisive power in terms of government payments of senior unguaranteed bank debt, when schools for children with autism are being closed down for lack of funds.

Looking further afield, this translated piece by Gerardo Pisarello and Jaume Asens, originally published in Spanish daily Público and reproduced on Attac Spain, teases out the prospects for democracy in Europe at the present juncture, and highlights the importance of effective debt auditing commissions -as promoted by Afri in Ireland- in the struggle for democracy.



(Photo: #Acampadasol)

Three years into the crisis, there are now hundreds of thousands of indignados who in different European cities are fighting back against the attack on the basic social rights of the population. On the other side, every new cutback in education or health, every new labour counter-reform, every proposal to raise the retirement age is presented as an unavoidable requirement in order to honour the debts, obtain more funding and save the euro. The circularity of the process flows into a closed tunnel. How far will they have to cut, privatise or deregulate to satiate the creditors? And to pay the debts of whom, precisely?

This is what debtocracy looks like: government by creditors. A fistful of debt holders able to impose their will over that of millions of people. The category has provided the title for an inspiring documentary, directed, not by chance, by Greek journalists:  Leonidas Vatikiotis, Knaterina Kitidi y Ari Hatzistefanou. Their work has numerous virtues. For starters, it shows how the growth in public debt is in line with subsidies and privileges accorded to economic sectors that serve a tiny minority. Or, as is the case in Spain, the bailout of private debt generated above all by an irresponsible group of financial entities. These policies have not been implemented by those who are suffering the effect of cutbacks. They have been agreed by governments colonised by savage powers which do not refrain, when the need arises, to speculate against them. And these powers count among their allies all sorts of intermediaries: ratings agencies, central banks, regulatory bodies that do not regulate.

We are forced to ask the questions: What is to be done? How do we prevent the already deteriorated democracy from being devoured by the insatiable debtocracy? The first thing, as the Greek documentary shows, is to bring an end to the perverse blackmail that demands more adjustments, more bailouts and new cutbacks. And to do this one must disturb the opacity with which this mechanism works. One must clarify the debt’s origin, composition and conditions or reproduction. Delineate a clear separation between public and private debt. And reject those payments whose legitimacy cannot be demonstrated. The proposal that one should not pay illegitimate debt is not new. It had a central role in countries that underwent financial collapses similar to those of the Eurozone, such as Ecuador and Argentina. In these countries, civil society, social movements, exerted pressure so that the debt of these countries, or at least part of it, would be considered ‘odious’. The latter notion was developed by a Russian jurist, Alexander Sack, in 1920. A former Tsarist minister who could hardly be suspected of radicalism, Sack understood that a debt could be considered odious or illegitimate when a) it had been drawn up with neither the knowledge nor the approval of the people; b) it was being spent in activities that did not bring any benefit to the people; c) the lender was conscious of this situation.

One does not need to be an experienced prosecutor to point out that a large part of European debt fits this description. In the Spanish case at least, it would be unthinkable without the huge subventions given to the banking sector, property developers and big builders. This process has taken place almost without debate. Without the responsibility of these groups having been duly clarified and without any benefit whatsoever for the majority of the population. The growth of public debt has not served to protect families with fraudulent and unpayable mortgages. Nor has it redirected credit towards socially and environmentally sustainable enterprises. And even less to reinforce public services that are underfunded by comparison with the European average. On the contrary. The bailouts have been carried out without any major trade-offs. And their beneficiaries have had no problem using them to inflate their income and to speculate against the public powers themselves. Neither the big investment firms, nor the ratings agencies, nor the European Union, nor the supposed internal regulatory entities such as the Bank of Spain, have been distant from this process. What is more, the more public debt has grown, the higher the interest rates demanded by its buyers and the tougher the demands for social and labour cutbacks.

None of this is inevitable. In Iceland, the population has managed to impose a referendum so as not to pay the debt generated by a handful of financial entities. And it has managed to seat certain bankers and politicians in the dock. In Spain, Greece, Portugal and Italy, penal actions have been initiated against ratings agencies for exaggerating the poor financial situation of certain countries for speculative ends. Greek social and union movements have gone further and have set in train, with jurists and economists, a debt audit commission. This commission is inspired by a similar experience that took place in Ecuador in 2005. Its objective is to determine which debts must be paid and how, and which ones must not be paid. ATTAC and other social organisations are proposing that these committees be expanded across the whole of Europe. Rejecting illegitimate debt and staggering the payment of the rest is fundamental in order to bring a halt to the social collapse that is approaching. Because what is at stake is not just the survival of certain basic social rights. It is the contest between democracy and debtocracy, between democracy and oligarchy. Or, as the indignados say, between real liberty, for everyone, or indefinite servitude at the hands of a fistful of financial and economic powers and their political intermediaries.

For those who haven’t seen it, here is the documentary Debtocracy referred to in the article.



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