Debt is to the free market and its political agenda as taxes are to democracy.
Both are THE ultimate source of power for their respective worlds. Taxes are what gives governments their power. Debt is what gives banks and the financial system its power. It has no other.
The power to tax your future work and wealth is what gives the government a guarantee of income and therefore of power stretching away in to the future. Debt does exactly the same for the world of private finance and ‘free markets’. Debt and taxes are in direct competition. They are both claims on the future, our future.
The competition is not just financial it is crucially political. Paying taxes supports the workings and power of nation states and ties us all to the nation state and to the politics of democratically electing governments. Taking on private debts whether personally or collectively, replaces loyalty to and concern for the nation state with concern for the banks and the private financial system they make up. Whichever of the two claims we are persuaded is the most important, takes hold of the reigns of power and has the final say in what we do today and where we are headed tomorrow. The system of private finance and debt is right now claiming that precedence and our politicians are helping them. We are being betrayed.
We are no longer making financial decisions within the context of a democratic system based upon nation states. We are choosing between that 19th century system and a new private-debt based system in which neither the nation state nor its democratic traditions have any standing nor power. The decisions that are being made for us and around us, often in spite of our voiced concerns, are transferring power from the nation state system to the private global financial system. From governance to management. From democracy to oligarchic technocracy.
Bailing out the banks and the wider system of private debt finance is a directly political act. Though that is not being made clear. Perhaps it is even being deliberately disguised. We are told bailing out the banks is purely a matter of practical and expedient necessity. A temporary financial matter. It is not. It is a fundamental shift in power.
Just look at the latest iteration of Dexia bank and its bail out by Belgium, Luxembourg and France. Today Dexia has said it needs yet another bail out and wants France and its tax payers to take on an even larger proportion of the cost. And this when France’s sovereign AAA rating is being questioned. Strengthen the bank, weaken the State. Divert taxes from the State and put them instead at the service of private finance. One system gains a claim on our future earnings the other relinquishes it. The system relinquishing it, losing its source of power, potency and agency, is the only system in which we have a democratic say. The system which is taking hold of that income and the power it confers is a system in which we have no say at all. Why are we letting this happen?
In the Nation State we are citizens. As such we not only have rights guaranteed by law and custom, but more critically all power resides in us and flows from us and is merely lent temporarily to those who we allow to rule. But this fine sounding form of words is hollow and meaningless without the flow of tax which gives nations their power. Power is, to steal a phrase, ‘measured by the pound or the fist’. Once we allow private finance to divert the flow of pounds to serve their private ends we are left with only the power of the fist. That is a road we do not want to find ourselves travelling.
The dynamic of the new politics is that the more private debt we have to pay the less tax our governments can raise. Already this tension is familiar. Neo-liberal parties of both right and left crowd the ‘centre ground’ of our debased and hollow politics to out shout each other about how they can keep taxes low and work with the private sector. As private debt increases so the state shrivels. Efficiency triumphs over fairness. One group of insiders (government and its various corruptions) is replaced by another from the private sector. It has become a touch stone of those on the political right that the danger of self serving corruption and inefficiency is a disease of government and the public sector. They are wrong. Both systems, public and private can be corrupted so that those running them make sure that the system serves their personal power and wealth in preference to doing the job it was originally designed to do. Just look at Enron or the banking system today.
The only difference is that when the state and its systems become rotted and corrupt I can vote out out the corrupt and seek to purge the rotten. I have no such power over global finance and the banks who animate it. There is no voting. There is no representation.
There is no tax without representation. BUT there is always debt collection without it. Think about how huge a difference that is.
Debt and taxes are the battle ground of two inimical political systems. One recognizes us as the source of its power and legitimacy. The other does not. One takes the welfare of all the people in its care as its reason for being. The other sees its job as enriching those who by accident of birth, happen to own it. Which system will care for you when misfortune strikes you or your children down? Which system will look to the future and which will damn the future for a stellar quarterly report and the bonus that brings?
The key is this – by bailing out the banks and the private financial system we are diverting tax and the power it confers from the Nation State and its system of democratic accountability, and instead empowering a system where debt not democracy reigns supreme. As more and more of our as yet un-earned wealth is already pledged to support the system of private debts and private debt-based wealth we find ourselves less and less able to control it or enforce even its own laws upon it. The financial system and those whose power comes from it are increasingly able to disregard any restraining laws. They can incur debts and ignore them, forcing others, us, to pay them for them. How? because we have tied our selves to their system and weakened the old system which used to protect us and work for us.
The danger we face is not Recession it is Repression.