Category Archives: Economics

A hole in the head: The fetishism of a failed state

20. III 2017

The society of the spectacle is turning into a soft version of the theater of cruelty, a burlesque of death with the globe as its stage (Jean Baudrillard)

Trepanation is an ancient procedure, second oldest after circumcision, in which a hole is drilled into the skull. People have been doing it for thousands of years in order to relieve headaches, seizures and various mental disorders, or as a ritualistic practice in which the shamans, the kings and the priests were trepanned in order to access new levels of consciousness. There is no scientific evidence that trepanning has any tangible benefits. Its proponents believe in a natural equilibrium between the brain and the rest of the universe that can be described poetically in pre-modern terms as “letting light in” or “letting devils out”. [1]One of the most highly publicized examples of trepanation in modern times dates back to the early 1970s. After years of experimentation with a range of hallucinogenics (and guided by deeply seeded cranial claustrophobia), in search of a new/permanent high, 27-year old Amanda Feilding performed self-trepanation by drilling a hole in her forehead with an electrical drill with a flat bottom and a foot pedal, while her partner filmed the entire event with an 8mm camera. She described the effect of trepanation at the time as a radical change in her consciousness comparing it to the tide coming in.

Almost half a century later, another quest for a new equilibrium is being staged. For several decades now, with the help of neoliberalism and globalization, Western oligarchs have enjoyed unprecedented positive externalities for their wealth accumulation. However, those positive externalities came at considerable social costs. As oligarchic wealth swelled, so did the social deficits they created; their compounding grew until their cumulative effect became so substantial that it began to undermine the normal functioning of the system. With time, the system’s legitimation became the main problem and with it the issue of the excess population — the growing volume of the population made redundant by neoliberalism’s global triumph whose size is now exceeding the managerial capacity of the planet. This has gained new urgency in the last decade as it became clear that democratic process has become incompatible with the oligarchic program, while force, tried many times before, is found to be a highly inefficient and expensive way of maintaining stability.

In the same way a hole in the head was an organic, non-chemically induced high for the 60s generation, the quest for a new social equilibrium is a permanent oligarchic high. State and ideology were no longer sufficient to satiate the appetite for wealth accumulation (or a need for its preservation). A new natural order was needed and, for that to happen, one had to remove the remaining barriers, break some bones and spill some blood. As the ideologically driven oligarchic high began to taper off, after reaching its peak during the last decades of globalized neoliberalism, a quest to find new levels of social consciousness gained new urgency. Ironically, the breakdown of communism – the ultimate triumph of neoliberal ideology – offered clues for how to proceed and how to define a search for a new equilibrium.

American oligarchs have had an eye on post-Soviet Russia ever since the collapse of communism. Their fascination with its post-communist transformation process continues to this date. In less than two decades, the country where chronic and severe scarcity, grossly mismanaged by the state, was its trademark, where everyone had to stand in line in order to maintain an elementary standard of living, where western middle-class lifestyle was just a pipe dream, and where getting rich was a crime, this very country became an oligarchic paradise producing practically overnight a stunning number of obscenely rich and disturbingly powerful individuals, who rose directly from the rubble of the dismembered Soviet state.

To a western mind, brought up on protestant ethics of hard work, such a transformation was difficult to grasp. Russian oligarchs represent a hybrid of communist apparatchiks, government bureaucrats, and strictly small-time criminals, sub-mediocrity in every aspect of their existence – nothing remarkable about them. Yet, they became an embodiment of an ultimate America dream. People who lived all their lives in isolation, had no knowledge or even exposure to business know-how, had no place or opportunities to learn about it, and lived close to what in America would be considered poverty level, emerged as super-rich. With time, it became clear that this puzzling transformation was not about the people, but about the actual conditions created by the collapse. This realization resonated hard with the aspiring American oligarchs, temporarily embarrassed billionaires, nouveau riche, and those who are always ready to operate on the margins of law, now struggling to ride Donald Trump’s coattails. Very early on, it became apparent that failed states create conditions of unimaginable business opportunities, a realization which became the primary driving force behind the fetish of the smaller government perpetuated by the American right.

Engineering failed states everywhere, and thus creating a global disequilibrium that would create chaos and force or accelerate a change became a signature strategy of American global politics in its late neoliberal phase. It reflected the interests of global oligarchies, a political trajectory that, using Immanuel Wallerstein’s terminology, could be described as democratic fascism — a 20% of the world keeps the remaining 80% in submission – an old wine in new bottles already tried out with different ratios and failing because of the flawed math. This project got new wind in the 1990s and continued to accelerate ever since capturing the post-communist Soviet block and spreading to the Balkans, Iraq, Afghanistan and North Africa, while in the West it showed up domestically in waves manifesting itself through various forms of identity politics and irrupting tensions between the global oligarchy and the right-wing populist implementations of the neo-feudal vision of the world.

This seemingly strange idea of forcing a change by destruction was first outlined in the works of the 19th century French thinkers (e.g. Alfred Jarry’s Ubu Roi), and developed further by the post-modernists and finally crystallized by Jean Baudrillard:

Total revolution is a strategy geared to escalate the system and push it to its breaking point. Then, giving up on every pretense of rationality, it starts revolving and achieves in the process a circularity of its own. The society of the spectacle is turning into a soft version of the theater of cruelty, a burlesque of death with the globe as its stage. Life is being exchanged for nothing, for a handful of glittering toys, work absorbs time like a sponge and leaves no traces. The system itself becomes the exterminator.

It is not difficult to recognize shades of this pattern in the political life of the developed world of the last year. The tide is coming in. For over two decades, the quest for a new order from chaos and dis-equilibrium – letting light in & devils out — has been operating full force away from home. Everybody has a hole in the head or is about to get one drilled, UK being the latest example, while France apparently eager to follow (Dutch got cold feet recently and decided not to rush with it). The time has come now for the next and possibly final step in an ongoing global transformation process for America to perform this bizarre experiment on itself. The unmistakable similarity between the mixture of the self-anesthetizing euphoria coupled with the cranial draft of the first two months of Trump’s presidency, and that experienced during a DIY trepanation seems to suggest that this process is well underway.

Even after all these years, Amanda Feilding, now Countess of Wemyss and March, wife of the landowning 13th Earl (he, too, has a hole in his head), and a friend of the Royal Family, has not abandoned her belief in the ancient practice of trepanning — drilling a hole in the skull — or her hope that it will one day gain the acceptance and legitimacy it deserves. She must be enjoying the spectacle.

[1] The higher state of mind sought by trepanation is that of childhood: When a baby is born, the top of the skull is soft and flexible. As a baby ages, the skull bones close which inhibits the full pulsation of the heartbeat, believed to be responsible for a wide range of problems and anxieties that come with the adult life.

Heroin & non-consensual capitalism: As the rich get richer, the poor get higher

29. X 2016

Heroin consolidates all your problems into one big one. No more worrying about aggression, repression, poverty, futility, and frustration – just heroin and how to get a hold of it.

The street price of heroin has dropped below $100 per gram. A disturbing development. For a novice, about 10-20 mg provides a decent high. Simply put, one can get high on heroin for the price of a chocolate bar. The most addictive drug is now also the cheapest, cheaper than cigarettes. Its 20-fold price decline, from $2000 in the 1980s, is unlike any other commodity or product. This is not a result of a more efficient production process or technological advances, but a curious cooperation between the forces of geopolitical and ideological makeup. Three decades of heroin price history parallel the transformation of the neoliberal state and society. It tells an interesting story of business, politics, economics, globalization, and governmentality.

heroin-prices

Heroin price history as experienced by wholesale, small dealers, and drug users

  • Pull back. The blood rushes in. Slowly push the plunger. I want this to last. Pull it back out again, the blood swirls back in. Now, squeeze! It rushes up my arm in tingles. Then it hits. It is like a mini explosion of pure pleasure. Everything is blissful and beautiful. It is pure joy to be alive, to have a body. Depending on the quantity and quality this is there for hours. It is sensual. All your nerves are on fire and just having someone run their fingers along your skin feels delicious. It isn’t really sexual. It is simply that the intensity of the experience lends itself to being described that way. This is when you are “high” on heroin.

In 1980 a wholesale dealer (if he had $1 million) could buy 1kg of heroin from the supplier at $1000/g (red line) and sold it to hoppers (street dealers) at $1700/g (blue line). In this transaction, he would have made $700/g profit ($700K for a kilo). In comparison, a hopper buys at $1700/g and sells to the users at $2000. His profit is $300/g, i.e. $3000 for a 10g package.

Since then, the price continues to decline at an annual rate of 9% — it drops to 1/3 of its value every 12 years. In the 1990s the wholesale price of heroin was $300/g. Dealers had to work harder (sell more heroin) to earn the same money as before. However, risks associated with drug dealing were lower and the money was still good, especially on a risk adjusted basis and when compared to the available alternatives. The business was booming.

Another decade and a half later and another threefold drop in prices: Heroin in the new century is selling for near $100. No longer is just the first hit free, but all subsequent hits are practically free as well. This changes the business model completely. Post-90s is the period of major consolidation and systematization of drug business. The dealers are no longer interested in quick profit from one-time sales to occasional users. They are now after lifetime subscribers. And the system continues to deliver them in numbers like never before. Drug businesses began to think and operate like any legal profit center, which sets in motion the true market forces.

Globalization has played a key role in these developments. It has achieved this effect in two ways. 1) Efficiency of the distribution of drugs: Lower transport costs, the use of the new IT and the enhanced worldwide competition have dramatically improved the efficiency of drug business. At the same time, the greater efficiency of the distribution process, made it easier to conceal the transport and the stock management of drugs. 2) Risk premium effect: Globalization has opened the borders of many countries with a surplus of poor and low-skilled workers. Millions of havenots who have little to lose have been attracted by the fantastic intermediation margins provided by the drug market[1].

Inelasticity of demand has defined the background as one of the main economic drivers. For heroin addicts, nothing is more frightening than being without heroin. No one who has gone through heroin withdrawal wants to repeat this experience. So, no matter how high the price, they will find the way to pay for it.

The Breakdown of communism has created new markets and sustained demand. Post-socialist countries, which have largely been sheltered from the influence of hard drugs in the past, suddenly opened up as a new untapped market. Erosion of local state institutions, and general hopelessness that ensued after its fall, were directly responsible for the surge in drug users.

The war on drugs became its own antithesis from inception. It supported high margins, which guaranteed that drug business remains more attractive, and therefore more competitive, than any other business[2]. Wholesale dealers held the racket. They effectively lowered their own risk by transferring their exposure to street dealers and were happy to accept lower margins as this increased their business longevity. What was lost on tighter margins was made up by the volume of the business. Bigger volumes and increasing profit gave access to the benefits of the legal system, attorneys and corrupt government officials, which provided an additional protective layer and reduced risks further, while elaborate money laundering schemes opened the doors to legitimate investment opportunities and further wealth accumulation. So, although margins were lower, on a risk adjusted basis, drug business never looked better.

Ideological mainlining: Biopolitical penetration of the American brain

One of the most extensive by-products of globalization is a surplus of humanity that is unwanted, inconvenient, and ultimately displaced. The volume of humans made redundant by capitalism’s global triumph grows unstoppably and comes close now to exceeding the managerial capacity of the planet; there is a plausible prospect of capitalist modernity choking on its own waste products which it can neither reassimilate or annihilate, nor detoxify. (Z. Bauman)

This is one of the biggest and the most acute problems today. The need to address this issue has shaped the transformation of the neoliberal state in the last decades from the welfare to the penal modality of its functioning. While neoliberalism produces social and economic vulnerability, criminalization produces ways to capitalize on that vulnerability. The criminalization of illicit drugs accomplishes three things at once. First, it reinforces socioeconomic vulnerability through a steady flow of pre-trial detainees, prisoners, parolees and families disrupted by harshly punitive sanctions. Second, it makes the economic viability of hard drugs dependent on a willingness to assume risk, especially as entry-level narco-labor. This willingness is a condition clearly associated with the socioeconomically marginalized – those who have little to lose but their “freedom” [3]. Third, it guarantees accessibility of hard drugs to the disenfranchised segment of the population. In this way, the very victims of global capitalism are trapped in the spider web of the carceral state and the more they struggle to survive in it, the more precarious their position becomes.

In the past, drug addiction existed as an expensive “luxury” for a small minority. Democratization of heavy drugs has been embraced by the ideological apparatus as a way of managing exclusion, poverty and discontent in general. Within the neoliberal project, the war on drugs has become synonymous to the war on poverty. And so, as poverty grew, so did the heroin usage.

heroin-and-gini

As the rich get richer, the poor get higher: Decline in heroin prices vs. inequality

  • Gini coefficients are often used as a measure of wealth inequality and, as such, they are an indirect measure of poverty. Developed/civilized societies, like the most advanced West European countries, have Gini’s typically in the mid 20s. Among developed countries, the United States has the highest levels of inequality, the only one in the western hemisphere with Gini above 40. In that metric, it is on par with China, the Dominican Republic, Nepal and Ecuador for income. The Figure shows the history of the (wholesale) heroin price against Gini coefficients (on inverted axis) since 1980. The two histories, both having exponential trend, show high degree of commonality. Declining price of heroin goes hand in hand with growth of poverty: As rich get richer, poor get higher.

State as enabler of self-destruction

I bought a gun and chose drugs instead (Kurt Cobain)

While global capitalism is the engine of production of socioeconomic vulnerability, the state is the main architect of subjects and spaces of exclusion, e.g. the black American male and the post-industrial ghetto, whose political and economic exclusion catalyzes participation in illicit economies as well as vulnerability to policing. The objective of criminal justice in the neoliberal state is no longer to correct behaviors that are socially harmful, but to identify the bodies that must be excluded from the population and justify this exclusion by labeling their behaviors as abnormal. In this context, heroin has been recognized (and embraced) as a powerful tool of self-destruction, capable of turning any resisting individual into a perfectly docile social subject, eminently manageable by its dependency.

The evolution of the heroin business reveals the inner logic of the massive consolidation of the state’s repressive apparatus in the post-1968 era. When viewed in this context, the war on drugs emerges as but one of many neoliberal strategies of governing, a technique for identifying populations that must be governed in other ways. The essence of these strategies is that they do not use force to destroy dissent, but push it to self-destruct. They stay as a constant reminder that power has been deemed as a highly ineffective tool of governing. Outside of its repressive apparatus, the state no longer represents the ability to engineer change, but has become an enabler. The war on drugs is an ideological answer to the problem of surplus population, and heroin an instrument of drainage of wasted lives.

[1] C. Costa Storti, P. De Grauwe, Int. J. Drug Policy, 20 (2009) 488

[2] In the 1990s, assuming a hopper sells 10g every day, he could make $2000 a day ($250 an hour or 50 times the minimum wage commensurate with qualifications of most of the drug dealers), which, translates into $500K a year (untaxed), equivalent to an $800K of taxable annual income. This is a full-blown Wall Street salary. In most cases, they pay “tax” to the wholesale distributors who “own” the territory hold the racket.

[3] D. Corva, Political Geography, 27 (2008) 176

There is something wrong with the future

28.VIII 2016

Give me back the Berlin wall
Give me Stalin and St. Paul
Give me Christ
Or give me Hiroshima
Destroy another fetus now
We don’t like children anyhow
I’ve seen the future, baby:
It is murder[1]

After getting accustomed to low crime rate since its peak in the 1990s, the world is once again entering a phase of accelerated crime growth. The rise of crime is palpable –- from rapes and robberies to homicides, from blue to white collar, from individual to mass murders, from random to organized and terrorist — although one cannot point to a single reason why. Crime is now at the inflection point. Its presence is felt everywhere, from info-sphere, media, entertainment and schools, to corporations, streets and politics. And the more efforts and resources are deployed to fight it, the more pervasive and out of control it gets. However, it would be a mistake to misidentify this trend as an aberration, an unwarranted side-effect of the post-industrial era. This state of affairs is an inevitable outcome of the neoliberal project at the core of which lies the idea of competition, a highly polarizing concept, which upsets the basic functioning of both society and the economy.

Neoliberalism was born at the intersection of the two crises, the crisis of governmentality and of dominant forms of power during the general contestation of the 60s. The emerging ideology outlined new forms of self-conduct, which satisfy aspiration to freedom in every sphere of existence, while the economic science was conceived as the newest technological invention through which new social reality revealed itself.

At the core of the neoliberal project lays the program of submission of human relationship to one single goal, competition, which has become a general political principle that governs reforms in all areas. This is an extension of market rationality to existence in its entirety. Its unprecedented systematization has profoundly shaped subsequent social reality, as a system of economic production became also a system of anthropological production[2].

So, how did we get here? What kind of reality has neoliberalism created and what is its future?

As the competent constituents of the past (e.g. bourgeoisie of industrial capitalism) gave way to the managerial class that turned competition into the only rule and virtue, the concept of competition gradually replaced that of competence. Only those who had become skilled in managerial functions could become wealthy through their labor. The decisions about production are more influenced by managers than experts as those decisions accounted for the reduction of costs and realization of profits. But, a managerial function detached from intellectual competence consists ultimately of fabrication, trickery, lies and fraudulent accounting, tax evasion and, if necessary, the physical removal of competitors[3].

Competition, once a guarantee of output’s quality, has undergone a major transformation. It has moved closer to the physical removal of competitors, ultimately leading to the systematic devastation of everything that does not submit to the profit of the strongest. Who competes better than those who eliminate their competitors? Mergers are just one form of physical elimination. Profit centers have used their considerable wealth to influence legislative process that removes all barriers for such activity. The state has become both an accomplice and a catalyst in this game. When was the last time government said no to a large merger?

Competition has become a reinforcing mechanism that provides a validation process for the legitimation of crime. Crime is no longer a hidden activity but the alpha & omega of every business, not just a marginal function, but the only way to stay in the game, and often the decisive winning factor in deregulated markets. Crime has disappeared thorough its proliferation. It cannot be eliminated, but it must be embraced. Its total and unconditional acceptance leads ultimately to its invisibility. Permissiveness has become the ultimate form of tyranny and capitalism has turned into a criminal system. Its survival in its present form is predicated on violence, because only violence is decisive.

Re-contextualization of murder: Society and human nature

Neoliberal government requires liberty as its condition of possibility: To govern is not to govern against liberty, or despite it; it is to govern through liberty to actively exploit the freedom allowed individuals so that they end up conforming to certain norms of their own accord[4].

Politics ultimately becomes the tool of social alignment with human nature and consists of the systematic removal of inhibitory mechanisms that allow us to come out as we actually are. Emergence of crime as a paradigm, its omnipresence, is the ultimate consequence of this political struggle. The modalities of resulting social structures have a deep resonance with who we really are.

This is the core problem of neoliberalism, the main reason why it is an anti-social project and why ultimately it either has to self-destruct or society as such has to disintegrate.

Designing a system of social organization which is in harmony with human nature is not something we should aspire to. It is generally a bad idea. A very bad one, actually. Without a considerable amount of inhibition, human nature is socially toxic. In fact, in order to become social, we have to abandon our true nature. The entire process of growing up, of becoming socially integrated – what is referred to as civility – is all about inhibiting our true impulses (e.g. toilette training, selfishness, lack of empathy, aggression, ability to engage in a dialogue,…). These inhibitory skills define us as social beings. Without them there is no society. We are born without those skills and we spend a considerable portion of our lives learning how to acquire and use them.

So, we are the real problem. Violence is inscribed in our genetic code and, as such, it becomes the essential component of neoliberalism. Killing as a (predominantly male) strategy of attaining the status position of dominant power has been adaptive. It is installed in the human brain because it worked. Murder has been a remarkably effective method of achieving evolutionary success (at least in the game of reproductive competition). Modern humans are descendants of those who succeeded in evolution. They are wired in the same way as their ancestors as dominant factors of success propagated[5]. Murder is inscribed deep into our genetic code; it only needs to be set free. The question is then, how close are we to the grand convergence when all barriers are removed and ideology becomes a true representation of ourselves. How far are we from setting free the murder? Well, we may not be there yet, but it is in the cards.

Life in neoliberal utopia. Who has the right to kill whom?

If utopia represents the impossible (imaginary places where social relations are represented, contested, and inverted), and developed society has reached the point where (almost) everything is possible, than the problem of finding our way is no longer the problem of disappearing utopia, but the problem of vision and politics. So what is the neoliberal utopia really like? What is a logical extrapolation of the neoliberal experience and what could be the next frontier for its all-around permissiveness?

Of all the issues that have emerged in the last years, murder has been the most divisive. From police brutality, to vigilante killings, mass murders, shooting of cops and terror attacks. All these cases were really about who has the right to kill whom, and at what price. Black lives matter, terrorism, the OJ Simpson trial, … they have all been about the same theme: Is it ok for the whites to kill blacks, for Muslims to kill Christians, for rich to kill poor, or even for the rich blacks to kill poor whites etc.? There has always been some implicit hierarchy of rules in that space.

Issues that have played a similar divisive role in the past have been alcohol prohibition, abortion (right to life), legality of drugs, prostitution, gay marriage, speed limits, etc. In many countries where these issues have been put to rest, tensions and problems associated with the issue have disappeared.

It is common sense to assume that removing an aura of taboo reduces the appeal of the vice. By legalizing something, one eliminates the challenge and reduces the abuse. For example, incidence of teenage drinking, drunken driving etc. are much lower in countries which have no minimum drinking age, and similarly in the case of car accidents vs. speed limit. In the same manner, one can argue, that legalization of drugs could lead to lower incidence of drug abuse and reduction of crimes associated with illegal drug trafficking. Same holds for prostitution. The upside of legalizing these activities is that society becomes less polarized – people get along better with each other – and, once divisive aspects are removed, politics becomes more constructive.

By analogy with these well-know cases, it makes sense to ask the same question regarding the murder. First, there is an insane number of murders every year. Obviously, the fact that murder is a capital offense is no detractor for killers; the rate of killing (individual/random/mass) keeps increasing. We now have more than one mass murder for each day in the year. The legitimate question to ask then is would the number of murders increase if they become legal. Most likely, there would be an initial surge, but then the trend would gradually subside and new lower murder rate equilibrium reached.

Death by shooting would gradually be accepted as a consequence of our freedoms, in the same way as death caused by traffic accidents, plane crashes, fire, or natural disasters have.

The benefits are immediately visible. First, guns would get the status of a regular appliance, like car or TV — everyone would own (at least) one. This would be plain common sense. All debates about the second amendment would become obsolete and with them the polarizing effects would go away. There would be no justification for the existence of the gun lobby. The NRA would be rendered politically irrelevant and politics, free of its influences, would be able to focus on issues that matter. Without polarization around the second amendment, republicans and democrats could even merge into a single party.

Smart guns would become the new technological innovation. Apple would produce first iGun, synchronizable with iPhone and iWatch, and Teslas would come with special road rage software and appropriate smart guns usable in such situations.

Compulsive killing would be frowned upon. It would be deemed uncool, along the lines people treat obesity. There would be awareness groups that provide counseling and talk shows where compulsive killers would be subject to shaming.

The US would enter its post-political phase (given the current political developments, this could be a blessing). There would be less need for police; private protection would be the new area of economic expansion. There would be far fewer people in prisons, both private and state run. No debates about death penalty or life sentence? All these would free the federal budget for more constructive projects. People would be much more considerate and respectful of each other’s feelings. Conflicts would tend to be avoided. Everyone would be nice to each other (assholes would have a very low chance of survival). Generally, people would get along much better. Right?

This is the face of neoliberal utopia. At the end, it is every man for himself, or in the words of Margaret Thatcher: There is no such thing as society. There are individual men and women, and there are families.

[1] Leonard Cohen, The Future

[2] Pierre Dardot and Christian Laval, The New Way of the World: On Neoliberal Society

[3] Franco Berardi, After the Future

[4] Dardot & Laval

[5] David Buss, The Murderer Next Door

 

I have returned there where I had never been

30. VI 2016

Debt and guilt are two intimately related concepts. In some languages (Sanskrit, Aramaic, Hebrew, German) the two words even have the same root — the German makes it particularly explicit: Schulden (debt) vs. Schuld (guilt). In the same way guilt implies that we will have to atone in the future (or in the afterlife) for the sins committed today, debt is a handover of a part of our future in exchange for present consumption.

The dynamics of capital accumulation is based on the perpetual process of investment in a borrowed future. “Borrow today and repay later” logic carries an implicit bet on the future. Without an optimistic outlook on the future, there is no lending or borrowing. Debt links the present and the future in a circular way: A prosperous future cannot happen without the present, and the present cannot take off without a belief in (better) future. In this way, the very concept of the future undergoes a transformation in capitalism: It no longer represents a timeline we experience, but a concept we envision.

By now, accumulation of debt has become so pervasive that today there is more debt than wealth in the world. No debt will ever be repaid. It exists in a virtual space with an understanding that it can never be allowed to intersect with the real world. Today, debt links institutions and individuals through virtual default — everyone is both a victim and an accomplice in that game[1]. So why does debt still persist?

Debt defines the power structure inherent in the debtor-creditor relation. It has become the main instrument of biopolitics, especially in the last decades of neoliberal hegemony. In the absence of a real collateral (like house, car or any material good), creditor feels entitled to impose upon the debtor’s modes of behavior consistent with initial expectations of debt issuance. It is logical for the creditor to demand from the debtor maintenance of a lifestyle that guarantees his creditworthiness and ability to honor his obligations. For example, in the case of welfare (social debt), government has the power and (it assumes) the rights to pressure the welfare recepient into a conduct that increases his chances of getting back on track — rehabilitated and reintegrated into the mainstream society — so that his social debt is effectively reduced.

In the past, the United States, and other developed countries, used to finance the production of others — this was the traditional center-periphery interaction. Its credit-financed growth, which came to a halt in 2007, created domestic imbalances. This “domestic debt” had to be paid by borrowing from abroad — borrowing to service an already existing debt — a grand pyramid scheme of a sort. In an odd and misguided interpretation of the theory of comparative advantages, the United States specialized in the production of debt, but in international currency (US dollar). This enabled others, e.g. China, to “buy dollars” in exchange for its commodities[2]. To put it more bluntly, the United States imported from China commodities, labor and real products, in exchange for debt – a piece of paper, an IOU. (Who really got a better deal here, or who could get potentially screwed in this transaction?) Thus came about a strange situation in which the emerging world producers, the periphery, also became the net world creditors on condition, however, that payment of debt never be demanded.

United States, the world’s largest economy, owes foreign countries more than $6 trillion dollars, about 1/3 of its GDP (and another $10-12tr domestically). To China alone, it owes $1.2tr, to Japan $1.1tr and to European countries around $1.5tr — about 2/3 of its total foreign debt is concentrated in three economic regions. In principle, these three (and not to forget, rather powerful) creditors have the right to tell the United States how to “behave” — how to conduct its policies to insure its ability to service and repay its debt. In turn, the US is incentivized to comply with whatever the imposed rules, this implicit “code of conduct”, in order to maintain its creditworthiness and ability to borrow more in the future.  Global capital, thus, can demand access to the US political process, and, in order to allow that access, the US laws should be modified accordingly: Global creditors are given a way to have a say about who is elected in policy making offices, including the president of the United States. This is how debt becomes an instrument of global governance. This is the same mechanism already seen at play when IMF and the European Union used their “creditor rights” to disagree with the results of the Greek elections, their choice of the finance minister and a general shape of the local political landscape, followed by their insistence to impose austerity measures in order to insure Greece’s ability to service its debt to the large European banks and to the detriment of the Greek economy and people.

In this way, democratic process becomes compromised by influence of global capital which demands as collateral the ability to protect its interests through presence in domestic policy or eventually access to the real US assets, demand tighter regulations and smaller financial markets as a way of reducing the default risk, or more favorable trade agreements.

Submission to the tyranny of the Global becomes the other side of debt. Our lives become arranged to harmonize with demands of extraterritorial capital flows over which local politics has no jurisdiction and little or no influence. In order to keep global capital happy, budgets have to be balanced, welfare state dismantled, safety net removed and precarity and asymptotic unemployment as a way of life accepted. In this constellation of things politics becomes the problem instead of solution and status quo the only (peaceful) way ahead.

The acceptance of the existing democratic mechanisms as the ultimate frame is preventing a radical (or any other) transformation. Peaceful social life is itself an expression of the (temporary) victory of one class- the ruling one, with the state as an apparatus of class domination. Unable to perform the functions that states generally do, all states eventually become failed states.

Compromised democracy and loss of autonomy is the price to pay for excessive government debt. This is a perpetual process whose end is becoming only more elusive with time. It looks increasingly less like atonement and more like an eternal damnation.

[1] Jean Baudrillard, The Transparency of Evil, Verso 2009

[2] Massimo Amato & Luca Fantacci, Saving the Market from Capitalism, Polity 2014