Distraction Capitalism 202: Debt as an Escape and the Realities of Political Economy
On several occasions, I have had the opportunity to ask a group of my more disputatious friends the following: “Imagine you were in an audience in which a speaker asked you to vote for the nation you would most likely support to become the most powerful nation on earth excluding your own?”
Perhaps surprisingly, many of them do come round to what I think is still the answer – “the United States.” There are a multitude of reasons for this, but for many of us, this does not include any real faith in U.S. democracy, economic growth and management, moral status, political dexterity or flexibility, due care, and concern for the long-term welfare of others throughout the world.
For many of us, this seeming contradiction would be a reasonable indicator of the essential tension that now governs the world system – at once the need to keep things steady and within the realms of our imagination, but also to effect very substantial change that makes our world more rational, more mindful, less needful and less distracted by the nonsense of the international media of all kinds, populist politicians, and ubiquitous cynicism, the latter disguised as intelligence.
The trouble is that, especially within modern democracies, any individual or group that proclaims actual radical plans and policies for a nation or globe will be shouted down, lampooned, and marginalised by a combination of conventional and Internet media, a dissonant noise that is not indeed composed of true responses but mostly full of vindictive assaults on the personality, nationality, or social location of the otherwise potential radicals. Distractions are so easy, and they render memory short.
In addition, at present, the leaders of all democratic political systems can quite readily shout out COVID, Ukraine, and inflation as emergencies that preclude all consideration of the long-term. The present condition of Britain is exemplary in this regard. None of the candidates for the headship of the Tory Party, and thus the prime ministerial position, has put up any long-term planning, though several have at least been previously associated with economic policies and projections, and all are engaged in a battle as to who can be quickest and deepest in reducing the British tax burden.
We live in a world where the same politician within a sentence or two can wholeheartedly promise reduced taxes, large expenditures on post-COVID health and social and employment impacts, increased employment, and ‘growing the economy’ without more than mild inflation. Miraculously a spurt of high economic growth which Britishers have been waiting for since 2008 and earlier will pay for increased expenditure at lowered tax rates in a world where politicians become statesmen, businessmen emerge stuffed full of probity, and good scientists and engineers are not seeking better jobs in India, Bangladesh, the Philippines, Ireland, or China.
This is not the place to give anything like a possible alternative position. But a few complexities might be introduced by focusing a little on the possibilities that lie in debt funding.
Any discussion or use of increased debt in funding our present need for recovery surely must centre on the planned usage of debt. If it is to be increased as fore-planned and transparent in a political regime that has a real democratic mandate, then at the core must be an intention to use increased debt to fund a mixture of medium- and long-term public projects that together could constitute a Keynesian style of positive intervention. Do not howl yet.
It’s true that Keynes himself would feel nauseous at this bare statement, if only because of the intricacies of his theory of money. But whether increased debt can be considered a true burden when it is directly used to fund the productive growth of industries and services under increasing levels of productivity depends on the calculation of an astute period of national accounting.
Even old man Smith himself allowed for increased debt and did so when apologising for increased expenditure by the state in times of war. We have suffered something that all media have labeled ‘warlike’ but without anything like the real asset and infrastructure destruction of material warfare at a world level. There is therefore a better chance of reinstating a policy of recovery by debt.
A major problem is that in most democratic capitalist nations debt proportions to GDP have been on the sporadic increase since 2008, certainly not just since the pandemic. In some of the very large and hitherto growing systems outside of Europe, East Asia, and the Anglophone nations, debt has remained modest for several reasons – some do not have the status to borrow very freely or at low cost in either public or private sectors; in many important sectors growth really has been almost self-funding, not requiring debt funding; in all, they have had lower COVIDITY measured by cases per million, and deaths per million than richer nations, for reasons that I have considered very extensively elsewhere, meaning that borrowing for short-term COVIDITY was comparatively very slight.
This backdrop means that electorates will be very wary indeed when any group of our present populist politicians begins to come out with borrowing/spending plans of this sort, even if they manage to be coherent in media delivery. They are often not. When the UK Labour Party in an earlier election fought against what was by then a group surrounding Boris Johnson and an increasingly rightest centre, the combination of a fairly incoherent Labour leadership under Jeremy Corbyn with a perfectly sensible and debatable economic plan from John McDonald, major economics minister, never emerged as a power in the debate, as it was seen as complex, non-populist, even threatening more taxes, and requiring of too much in the way of best possible outcomes. The Tories won in a landslide and threaten to survive even the present gruesome turn of events.
So, the issue is far more one of political economy than of financial/public sector economics, for an appeal to real production of real goods and services requires an older trust of democratic processes, the power of elections, and or trusted regimes; it requires a public closeness of debate and policy formation that is both precise in preparing the ground prior to public delivery and well-prepared for the subsequent policy delivery process itself.
This is where democracy is falling short of its old potential. It was always built upon colonialism and exploitation, but it was also mostly forced to be transparent because large social classes were involved in political outcomes very directly through mass elections, local government-based active communities, and a media that could be held up to face the consequences of its own bias or ineptitude, at least more so than can be said at present.
And the political economy is no beguilingly technical matter, viewable through the equations of even the much-modified neo-classical economics that we have inherited from the 1950s. It requires some sort of organic civil society. This sounds idealist and is dangerously back to the normative. I am sorry about that. But it can be seen positively and with more sympathy. It is possible through the political process to forward a 21st century New Deal in which major capitalist nations agree to a broad pattern of interventionism in which the middle-income nations are directly involved as private and public investors and traders.
Growth in this latter group shall be far higher than that in the ‘mature industrial’ democratic capitalist nations for some time, assuming the absence of this Keynesian program. On the other hand, assuming some greater collaboration, then the divergence would be at least lesser, the overall average performance would be greater, and there might be some movement for those nations who have considerably increased their levels of economic freedoms to emerge as nations of greater cultural and political freedom. Old men and their narrow regimes need not last for long, and a rising middle class is a wonderous thing.
I leave you with a terrible irony. Between the 1950s to the 1980s, when Western economists and politicians were lecturing the third world on what to do about their poverty and misery, when they were very stringent with the then IMF regulations on who could lend what to whom and who needed to up their exchange rates and so on, very little third world development actually occurred. The breakaway of the Newly Industrial Economies of East Asia was but a happy proportion of a dismal total, and the Chinese renovation was not even recognised by most analysts.
Now the whole conception of a world of poverty has been massively interrupted, and lower-income nations are now under more influence, investment, and trade from East Asian nations – especially China and Japan who were externally invisible in the 1970s. The third world really is shrinking, much more than in the earlier years of the Cold War and rampant capitalism. The world is actually a lot better off in many ways. But still, we are messing up.