The Making of the Indebted State

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Debt, Discipline and Democracy under the Neoliberal Condition

It is often said that money begets power, but if this is so, through what exact mechanisms does the “1 percent” exert its seemingly untrammeled political influence over the state? Drawing on recent interdisciplinary attempts to re-conceptualize money as debt and debt as a power relation, this paper aims to help uncover the disciplinary mechanism that enforces debtor compliance and ensures continued repayment. Most importantly, it argues that – much more than just buying political influence with their superior wealth – private bankers derive their main power from their control over capital flows and their capacity to create money out of thin air. Identifying two types of money (commodity money and credit money) and two associated forms of power (purchasing power and structural power), it tries to show how the neoliberal move towards privately created credit money has endowed global finance with unprecedented structural power, rendering states increasingly dependent on private banks to maintain the process of capital accumulation. The paper concludes that the making of the indebted state under neoliberalism has brought about an unraveling of state sovereignty and political representation, and hence poses a major challenge to traditional democratic processes.

http://roarmag.org/2013/09/the-making-of-the-indebted-state-under-neolib...

Introduction: Thou Shalt Not Default!

The only part of the so-called national wealth that actually enters into
the collective possessions of modern peoples is their national debt.

~ Karl Marx, Capital, Vol. I (1867:919)

The debt must be repaid. Such is the gospel sung by the leaders of our world. Entire nations are now being subjected to a permanent state of sovereign debt bondage just to keep the money flowing towards their creditors. In an idle attempt to please the markets, others continue to stand fast in their dogmatic faith that enough (self-)flagellation will eventually bring redemption. With an army of technocrats waiting in the wings, elected leaders have found themselves forced out of office in investor-led stampedes for the exits, while millions of ordinary people are being trampled in the process. As one recent epidemiological study shows, it is a violent and deadly logic: with dramatic increases in suicide rates, HIV infections and child mortality, the single-minded insistence on austerity has transformed today’s debt crises into “veritable epidemics, ruining or extinguishing thousands of lives in a misguided attempt to balance budgets and shore up financial markets,” (Stuckler and Basu 2013). In the cradle of European democracy, under the watching gaze of the acropolis, civilization has been strangled to the point where children now go to school hungry and neo-Nazi stormtroopers run racist pogroms in broad daylight. But as Germany’s Finance Minister reassuringly tells us: “everyone knows the problems of Greek society are to be found in Greece and not abroad.” The narrative of Schuld – which Nietzsche reminds us means both debt, guilt and blame – continues to give a moralistic twist to policy decisions that in the final analysis serve a simple and unambiguous purpose: to prevent losses for the big banks....