Borrowing The Future
By Vinay Bhat
09 October, 2011
Countercurrents.org
It is no news that there is a financial crisis around the world. One has to only look into one's television sets as there are crowds on the streets across the globe demanding their right to live as human beings. Particularly revealing in all these events is the recent debt crisis that was faced by the US. In the summer of 2011, the US debt ceiling limit was almost reached, and the US administration warned of a financial catastrophe if this were not raised. In this case the common American did not completely lose out, but the rich elite did get the better end. Unlike Europe where widespread austerity measures have forced crowds on the street, the US has not quite taken the extreme measures, and that does have a lot to do with the fact America's military might and imperial reach ensures that it is still the safest bet in the world. Ultimately a compromise was reached between the Democrats and Republicans with the debt ceiling was raise by approximate 2.1 trillion dollars, paving the way for the US to borrow more. Of course part of this borrowing would go towards public services such as Social Security and Medicare, which is what the poor and elderly depend on, but another portion would go towards financing the 2 billion dollars a week wars.
History tells us that currency money in its present form started being issued in the form of IOUs (abbreviated from I owe you) issued in exchange for gold. Paper money made it easy to transact in the market. These IOUs were issued by entities known as banks. What was in it for the bank itself? The bank could lend out some of the gold it had and charge interest. Thus the world of finance capital came into existence. The birth of nation states saw the need for them to borrow capital in order to imprint legitimacy of it's own construct. This kind of borrowing was done and still continues primarily through issuing of bonds with a promise to pay back in the future. Government bonds have traditionally been the safest investments for private investors and banks, simply because the State can extract capital out of its population and until they are dry and in the short term at least ensure the investments are honored.
The debt ceiling was first introduced in the US to finance the first world war. Up until that point, the Congress had to vote on every piece of public debt. The ceiling was introduced so that the country could borrow freely within the confines of a ceiling without having to go about the control of public representatives each time they needed to wage war. This made private banks pleased and war financing became profitable. Not only was future lending guaranteed, but conquests made payments all the more probable.
The labor debate in Wisconsin earlier in 2011, where public employees demanded their right to form unions spawned country wide protests with corporate interests ultimately winning. This time around corporate interests did have a marginal victory again with a Congress mandate that a large part of financing the debt would come from public spending cuts. This would potentially deplete society of even more jobs at a time where official unemployment figures are hinging at 10 percent, but how does that matter when tax increases for the super-rich, is the only projected catastrophe.
But is debt really required to provide public services, and what role should a State play in provisioning of basic services – education, health, food security, personal security and others that are required by society? A large portion of the need for debt does obviously stem from the fact that it is debt which fuels finance capital and hence the capitalist economy. Without the promise to “owe something” to the controllers of capital, the whole system would fall apart. If the State could provide these services without the use of finance capital perhaps, we can imagine a debt free economy. But, with finance capital being the mode of transacting, debt will also be a requirement and in fact a desired element for the controllers of this artificial construct. Behind layers and layers of the necessity to pay back debt, one will always see what lies underneath is the threat of violence. The US as mentioned earlier is in the unique position where it used debt to finance it's military complex and can in the eventuality threaten any creditor that knocks on its door.
It is this same mechanism that also necessitates the commodification of all resources. For we need to place a monetary price tag on everything a human being consumes. How else does one assert authority over populations. The underlying collateral of all debt and money would have to fall on natural resources – land, water and eventually with technology perhaps the air as well.
Looking back at home in India, one sees that India survived the financial crisis perhaps better than many in the West and perhaps even better than China due to the fact there have been some progressive laws passed which provide for the health security, education and employment of the population. Local consumption ensured that the middle class remained employment. There are however alarming trends and we might not be as insulated the next time around. India's investment in US treasury bonds increased from its 3 percent of foreign reserves to almost 18 percent between 2008 and 2009. It is not that the 830 million in India living on under 20 rupees a day get affected by this in a direct way, but within probably three degrees of separation we place their land and resources at risk. As India's investments in US bonds increases, so reduce liquid funds for provisioning of basic social services. As the pressure mounts on once again generating the additional capital needed, the State is forced to resorting to privatizing natural resources and in turn grabbing the land and livelihoods of its own people This is the greatest irony for a State that claims to be raising this capital for the very same masses whom it impoverishes.
Again as long as debt and capital exists in its present form, the marginalized in India will continue the same fate and only emerge out of their situation through serendipity or personal tales of heroism. There simply isn't anything structural to alleviate them out of their misery. This also means that as we entrench ourselves in the global capital economy, the deeper we intertwine ourselves with the machinations of the global free trade systems, and eventually be face the same circumstances that the US sees itself in. Debt would creep up, and we might not have the same mechanisms that keeps the Americans afloat.
Debt is not new for the marginalized in India. The local moneylender has been the bane of the oppressed for centuries. Result of defaulting has varied from bonded labor to losing a home and livelihoods. In the neo-liberal era the moneylender has changed his face. He comes in the form of a World Bank, IMF indirectly or more directly as a Monsanto. As capital requirements enter people's livelihoods, sheer survival becomes more difficult. Case in point being the over 200,000 farmers in India who have committed over the last twenty years suicide after being debt ridden – symbolically using the same capital driven means to end their lives – ingesting pesticide. Opening up all our resources for grabs to re-pay this debt, which anyways is happening, is what will eventually signal the death of the marginalized. Emancipation requires that communities control their economies, their means of production and their resources. If we seek not to owe anything as a people, we must not rely on the construct that creates this imposed moral obligation. Solutions like micro-finance perhaps work in the short term, but only elongate the gap before the same instrument inflicts pain again.
In a world ridden with this ailment we call debt, perhaps this is the time where society must re-align itself out of necessity and not ideology. Taking a truly individualistic view as well, perhaps co-operating between neighbors is what paves the path forward. Co-operation, morality, assistance and contributing to society must abstract themselves from this extractive mechanism that capital presents. The marginalized in India and other parts of the globe have been facing the brunt of the consequences of finance capital market for decades now. It has succeeded in creating additional hierarchies that are antagonistic of a fully functional democracy. The divide between the classes continues to expand, and people continue to die of the structural violence unleashed – hunger, lack of health and lack of security. While the middle class in the US gets squeezed in debt, the Indian middle class must weigh on what the future holds, lest the divide grows even larger spelling a point of no return.
Vinay Bhat is a management consultant by profession. He is also a volunteer with the Association for India's Development (AID), Free Binayak Sen campaign and Mining Zone People's Solidarity Group (MZPSG). Vinay lives in the Bay Area in California.
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