2013 AnExchangeonCapitalDebtandtheFu
- (Graeber & Piketty, 2013) ⇒ David Graeber, and Thomas Piketty. (2013). “An Exchange on Capital, Debt, and the Future.” Discussion at Ecole Normale Superieure moderated by Joseph Confavreux and Jade Lindgaard..
Subject Headings: Debt Forgiveness, Economic Collapse, Global Capital Taxation.
Notes
Cited By
Quotes
- Moderators
- You both appear to think that the prevailing economic and financial system has run its course, and cannot endure much longer in its present form. I would like to ask each of you to explain why.
I am not sure that we are on the eve of a collapse of the system, at least not from a purely economic viewpoint. A lot depends on political reactions and on the ability of the elites to persuade the rest of the population that the present situation is acceptable. If an effective apparatus of persuasion is in place, there is no reason why the system should not continue to exist as it is. I do not believe that strictly economic factors can precipitate its fall.
Karl Marx thought that the falling rate of profit would inevitably bring about the fall of the capitalist system. In a sense, I am more pessimistic than Marx, because even given a stable rate of return on capital, say around 5 percent on average, and steady growth, wealth would continue to concentrate, and the rate of accumulation of inherited wealth would go on increasing.
But, in itself, this does not mean an economic collapse will occur. My thesis is thus different from Marx’s, and also from David Graeber’s. An explosion of debt, especially American debt, is certainly happening, as we have all observed, but at the same time there is a vast increase in capital — an increase far greater than that of total debt.
The creation of net wealth is thus positive, because capital growth surpasses even the increase in debt. I am not saying that this is necessarily a good thing. I am saying that there is no purely economic justification for claiming that this phenomenon entails the collapse of the system.
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Yes. But there again, the apparatus of persuasion — or of repression, or a combination of the two, depending on what country you are considering — may allow the present situation to persist. A century ago, despite universal suffrage, the elites of the industrialized countries succeeded in preventing any progressive taxes. It took World War I to bring about a progressive income tax.
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That is an interesting question. I loved your book, by the way. The only criticism I would have is that capital cannot be reduced to debt. It is true that more debt for some, public or private, is bound to increase the resources of others. But you do not directly address possible differences between debt and capital. You argue as if the history of capital were indistinguishable from that of debt. I think you are right to say that debt plays a much more significant historical part than has been assumed — especially when you dismiss the fairy tales retailed by economists concerning capital accumulation, barter, the invention of money, or monetary exchange. The way you redirect our attention by stressing the relationships of power and domination that underlie relationships of indebtedness is admirable. The fact remains that capital is useful in itself. The inequalities associated with it are problematic, but not capital per se. And there is much more capital today than formerly.
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Thus canceling debt does not necessarily mean that the richest will lose money in the process.
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No one is saying that debt abolition is the only solution. In my view, it is simply an essential component in a whole set of solutions. I do not believe that eliminating debt can solve all our problems. I am thinking rather in terms of a conceptual break. To be quite honest, I really think that massive debt abolition is going to occur no matter what. For me the main issue is just how this is going to happen: openly, by virtue of a top-down decision designed to protect the interests of existing institutions, or under pressure from social movements. Most of the political and economic leaders to whom I have spoken acknowledge that some sort of debt abolition is required.
That is precisely my problem: the bankers agree with you!
But shouldn’t such a progressive tax on capital be international in scope?
Yes, of course. I am an internationalist, and so are you, so we have no differences on that score.
All the same, it is an interesting question, because historically whenever an era of expensive credit begins, some kind of overarching means is generally found for protecting debtors and giving creditors free rein — even going so far on occasion as to actively favor debtors. Such mechanisms for constraining creditors’ power over debtors have taken many forms, including a monarchy based on divine right in Mesopotamia, the biblical Law of Jubilee, medieval canon law, Buddhism, Confucianism, and so on. In short, societies adopting such principles had institutional or moral structures designed to maintain some form of control over lending practices.
Today we are in a period in which lending is decisive, but we do things the other way around. We already have the overarching institutions, which are almost religious in character inasmuch as neoliberalism may be seen as a kind of faith. But instead of protecting debtors from creditors, these institutions do just the opposite.
For thirty years a combination of the IMF, the World Trade Organization (WTO), the financial institutions that came out of Bretton Woods, the investment banks, the multinationals, and the international NGOs has constituted an international bureaucracy of global scope. And unlike the United Nations, this bureaucracy has the means to enforce its decisions. Since this whole structure was explicitly put in place in order to defend the interests of financiers and creditors, how might it be politically possible to transform it in such a way as to have it do the exact opposite of what it was designed to do?
All I can say is that a lot of people would need to be convinced! But it is important to know exactly where we want to get to. What bothers me here is the fact that for the large institutions you are talking about, it is far more natural than you think to forgive debt. Why do you think they like the word “haircut” so much? Your prescription is trapped in the moral universe of the market. The culprit is the party that owns the debt. The danger I see is that the financial institutions move in exactly the direction you describe.
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- Moderators
- What about the risk of tax evasion? Isn’t it easier for the owners of capital to avoid taxes than to avoid the impact of debt cancellation?
No, it is very easy to avoid the effects of debt forgiveness, just as it is easy to protect oneself against inflation. The big portfolios do not hold letters of credit — they are composed of real capital. Is it possible to fight tax evasion? Yes, if you want to, you can. When modern governments really want their decisions to be respected, they succeed in getting them respected.
When Western governments want to send a million soldiers to Kuwait to prevent Kuwaiti oil from being seized by Iraq, they do it. Let’s be serious: If they are not afraid of an Iraq, they have no reason to fear the Bahamas or New Jersey. Levying progressive taxes on wealth and capital poses no technical problems. It is a matter of political will.
References
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| Author | volume | Date Value | title | type | journal | titleUrl | doi | note | year | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2013 AnExchangeonCapitalDebtandtheFu | David Graeber Thomas Piketty (1971-present) | An Exchange on Capital, Debt, and the Future | 2013 |