Debt, Speculation, Apocalypse
September 9, 2011 § 2 Comments
Immanuel Wallerstein likes to point out that the French Revolution introduced several profoundly new ideas in politics — ideas which, fifty years before the revolution, the vast majority of educated Europeans would have written off as crazy, but which, fifty years afterward, just about anyone felt they had to at least pretend they thought were true. The first is that social change is inevitable and desirable: that the natural direction of history is for civilization to gradually improve. The second is that the appropriate agent to manage such change is the government. The third is that the government gains its legitimacy from an entity called “the people.” It’s easy to see how the very idea of a national debt — a promise of continual future improvement (at the very least, five percent annual improvement) made by government to people — might itself have played a role in inspiring such a revolutionary new perspective. Yet at the same time, when one looks at what men like Mirabeau, Voltaire, Diderot, Siéyes — the philosophes who first proposed the notion of what we now call “civilization” — were actually arguing about in the years immediately leading up to the revolution, it was even more about the danger of apocalyptic catastrophe, of the prospect of civilization as they knew it being destroyed by default and economic collapse.
Part of the problem was the obvious one: the national debt is, first, born of war; second, it is not owed to all the people equally, but above all to capitalists — and in France at that time, “capitalist” meant, specifically, “those who held pieces of the national debt.” The more democratically inclined felt that the entire situation was opprobrious. “The modern theory of the perpetuation of debt,” Thomas Jefferson wrote, around this same time, “has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating.” Most Enlightenment thinkers feared that it promised even worse. Intrinsic to the new, “modern” notion of impersonal debt, after all, was the possibility of bankruptcy. Bankruptcy, at that time, was indeed something of a personal apocalypse: it meant prison, the dissiolution of one’s estate; for the least fortunate, it meant torture, starvation, and death. What national bankruptcy would mean, at that point in history, nobody knew. There were simply no precedents. Yet as nations fought greater and bloodier wars, and their debts escalated geometrically, default began to appear unavoidable. Abbe Sieyès first put forward his great scheme for representative government, for instance, primarily as a way of reforming the national finances, to fend off the inevitable catastrophe. And when it happened, what would it look like? Would the money become worthless? Would military regimes seize power, regiems across Europe be likewise forced to default and fall like dominos, plunging the continent into endless barbarism, darkness, and war? Many were already anticipating the prospect of the Terror long before the revolution itself.
It’s a strange story because we are used to thinking of the Enlightenment as the dawn of a unique phase of human optimism, borne on assumptions that the advance of science and human knowledge would inevitably make life wiser, safer, and better for everyone — a naïve faith said to have peaked in the Fabian socialism of the 1890s, only to be annihilated in the trenches of World War I. In fact, even the Victorians were haunted by the dangers of degradation and decline. Most of all, Victorians shared the near-universal assumption that capitalism itself would not be around forever. Insurrection seemed imminent. Many Victorian capitalists operated under the sincere belief that they might, at any moment, find themselves hanging from trees. In Chicago, for instance, a friend once took me on a drive down a beautiful old street, full of mansions from the 1870s: the reason, he explained, that it looked like that, was that most of Chicago’s rich industrialists of the time were so convinced that the revolution was imminent that they collectively relocated along the road that led to the nearest military base. Almost none of the great theorists of capitalism, from anywhere on the political spectrum, from Marx to Weber, to Schumpeter, to von Mises, felt that capitalism was likely to be around for more than another generation or two at the most.
One could go further: the moment that the fear of imminent social revolution no longer seemed plausible, by the end of World War II, we were immediately presented with the specter of nuclear holocaust. Then, when that no longer seemed plausible, we discovered global warming. This is not to say that these threats were not, and are not, real. Yet it does seem strange that capitalism feels the constant need to imagine, or to actually manufacture, the means of its own imminent extinction. It’s in dramatic contrast to the behavior of the leaders of socialist regimes, from Cuba to Albania, who, when they came to power, immediately began acting as if their system would be around forever — ironically enough, considering they in fact turned out to be something of an historical blip.
Perhaps the reason is because what was true in 1710 is still true. Presented with the prospect of its own eternity, capitalism — or anyway, financial capitalism — simply explodes. Because if there’s no end to it, there’s absolutely no reason not to generate credit — that is, future money, indefinitely. Recent events would certainly seem to confirm this. The period leading up to 2008 was one in which many began to believe that capitalism really was going to be around forever; at the very least, no one seemed any longer to be able to imagine an alternative. The immediate effect was a series of increasingly reckless bubbles that brought the whole apparatus crashing down.
— David Graeber, Debt: The First 5,000 Years (359-60)