Everyone loves to create debt narratives. From politicians to economists, local pundits to talking heads, the use of debt – loaded with historical baggage – refers pejoratively to the money spent by unwise nations. With even less tact, economists love to slam current conditions – the impending Eurozone death-knell being the disaster-du-jour – with recalcitrant reminders that history could have prepared us for the difficulty of today. Debt is universal for nations, and economists like Paul Krugman champion certain traditional debt management complete with associated historical imperatives. National debt, while not separate from history, can be understood as a tool for the public good, coopted in its current state by private investment. Tradition, derided in most other aspects of contemporary life, still supposedly holds the curative for all current economic ills. Instead, the impetus behind debt acquisition and economic stimulation should be held up to the light, and examined in terms of how it does or does not meet the needs of the nation’s citizens.
As Paul Krugman notes, “debt is money we owe ourselves” where payment does not lead to richness nor having it lead to poverty. While national debt may “pose a threat to financial stability,” the march towards austerity offers just as much danger, leaning towards cost cutting that stalls economic growth and perpetuates existent financial depression. National debt nominally represents an economic balancing force, a social tool for well-to-do nations to stimulate struggling economies without the direct cost of material wealth or specie. When the balance tips all together towards budgetary restriction and austerity, the entire global market suffers dramatically.
Total austerity compounds the financial instability of debt with an increased focus on saving non-existent money. Krugman’s microscopic example outlines the broader macrocosmic reality: “[M]y spending is your income, and your spending is my income, so if everyone slashes spending at the same time, incomes go down around the world.” Debt, or the allocation of debt, from Krugman’s “core economies” to the “belt-tightening … periphery” maintains growth through a sustainable measure of balanced spending and saving. Frugality applied en masse quickly turns cost-saving into car-crash disaster economics.
Turning the balance beam of debt into a slip n’ slide leads directly to financial purgatory. While suffering nations could potentially cut certain costs, Krugman notes that a correspondent increase in spending from stable nations just is not coming. Debt, at the best of times, harbors potential salvation in the trading of non-existent currency for real products or social services. At its worst, that is, when every nations attempts to lower their piece of the debt-pie, national debt becomes a toxic portion of national spending, where interest rates skyrocket and the economic deflation decimates any possible internal growth. The macroeconomic movements of debt avoid the odious motivations for such climactic national decisions.
Historical justifications heighten the untenable modern usage of national debt. Krugman’s later condemnations of “self-indulgent politicians ignor[ing] arithmetic and the lessons of history” at once massages the ego of the prognosticator while ignoring general suffering. Dealing in “fantasy economics” is not just the purview of the German or British governments demanding austerity from pained debtor nations, but also the antiquated esteem that Krugman has for governmental financial control. The economic meandering of powerful nations stop being a game of knights and kings once the general population drowns in unemployment and deferred state welfare. Debt, again and again, must be used to service the nation as a tool for the public, not a plaything for the economic posturing of Europe and North America.
Krugman’s digression into the tale of the Euro’s creation further codifies the manipulation of national debt as a tool for imperialistic financial ventures. Phrases referencing Europe’s “monstrous self-indulgence” or the initial American critiques of the Euro as preservation of the U.S. Dollar’s “exorbitant privilege” – from Krugman, but also in the generative discussion of currency – further distance debt from reality. The imperialism inherent to such discussion takes the public utility from national finances, and moves discussion towards pointless exercises in legacy building. The Euro and the U.S. Dollar are not metaphorical extensions of a nation. When conceived as such, only the public suffers, as imaginary currencies wars cripple the economic wherewithal to use debt to alleviate real problems. Krugman himself participates in a different kind of “monstrous self-indulgence” where hindsight fails to see the economic forest for the trees: people suffer when debt becomes the obstacle to social spending.
There is inherent danger in blindly following the current debt model. As Conn Hallinan astutely observes, economic “[m]yths are dangerous because they rely more on cultural memory and prejudice than facts.” There is no need to complicate the application of national debt, yet we do. There is no need to apply historical rationales on the motivations of debt manipulation, yet we do. There is a need to break from the capitalistic exploitation of debt, yet we do not. Hallinan details a myriad of examples of private exploitation that restrict national spending. Chilling largesse emphasizes a need for debt to somehow split from contemporary usage and historical ad hominem descriptions of its failure as a financial tool.
Fact is the best illustrator to debunk the need for austerity and reduced national debt. Nobel-Prize winning economist Joseph Stiglitz described the economic conditions as Europe moving its debts “from the private sector to the public sector – a well-established pattern over the past half-century.” Ireland used a thirty-billion Euro bailout to save the Anglo-Irish Bank. Currency speculators submarined Portugal’s economy to the point of IMF-mandated austerity measures. Despite Greeks spending less of their GDP on social services than Germany or Sweden and working 600 more man hours a year than Germans, the cooked financial books via Goldman Sachs that gained Greece entrance into the Eurozone eventually tanked an economy already rife with top heavy corruption. Hallinan’s statistical truisms show how little attention follows the plight of the citizen when dealing with privatized greed.
Lazy turns-of-phrase aptly describe current debt application. The writing is on the wall, where Mark Blyth can correctly claim that admonishing the Greek government is just “political cover for the fact that what we’ve done is bail out some of the richest people in European society and put the cost on some of the poorest.” Faulty casino metaphors, where there is no risk for the private gambler, define the Greek bailout – roughly 89% of relief funds went to private equity firms and banks. Even Hallinan himself is caught in the trap of allegory, using Aesop’s fable to describe the industrious ants pulling one over the much-maligned grasshoppers. While useful, the metaphors only serve as an economic meet cute that avoids the central misuse of debt. Staunch capitalism has betrayed the public trust, using an amalgam of historical imperatives about thriftiness to cover a piratical approach to privatization. What was once a tool for national uplift has become a verifiable yolk, as wealthy institutions and their indebted prosperous nations transfer financial mismanagement onto countries carrying too much of a good thing. National debt kills quietly, but never quickly, as creditors pursue exactitude of cents without any common sense.
Narrative control is important when maintaining power. Whether covered in the regalia of tradition or coated in the slick veneer of modernity, debt, austerity, and all the associated codes of financial conduct come from atop a shining hill. Never mind how the hill only shines because of its dubious financial origins. Pay no attention to the scaffolding, built on the misery of many to preserve the excesses of the few. Just pay attention to the speaker. They will instruct you on how best to save your nation! How to avoid the poor house, by simply spending less and walking back your goals, or expectations of social assistance. Debt is yours to carry and repay, but not yours to use for any kind of economic stimulus. If you listen carefully enough, you might even hear whispers that it was never yours in the first place. Remember though, maybe Paul Krugman is right, and the money is imaginary anyways.