Monday, April 29, 2013

Some links on public debt

mostly about the west. From a review  (2003,unfortunately gated) of James Macdonald's "A nation deep in debt:The financial roots of democracy"
"Governments, he says, began to need ever-increasing amounts of money, mostly in order to wage war, and this need for more and more money necessarily led them to concoct various schemes for extracting funds from their subjects or citizens—first by taxing and then by borrowing. In time those governments that were most successful in inducing their subjects or citizens to lend money to them inevitably became more democratic. That is, governments that were borrowing discovered that identifying their interest more closely with that of their subjects or citizens who were doing the lending was the easiest and cheapest way of raising money; and they could best do this by allowing their subjects or citizens to have a representative say in governing. "
Another review again of both James Macdonald's book as well as Bruce Mann's "Republic of Debtors" is here.
There is another review by James Glabraith(2006) which is extensively quoted in Economist's View:
"Given the simplicity and power of this argument, one reads the epilogue of this great book with surprise and sorrow. In MacDonald’s view, it’s all over. In the nuclear age, deficits and bond drives on the world-war scale are history, and the American citizenry has lost its pride of place as creditor of the American state. Today, financial intermediaries hold about 37 percent of U.S. public debt; Japan and China, along with other countries, now hold about 30 percent. The proportion of U.S. debt owned directly by Americans has fallen to below 10 percent; in 1945 (when the debt was more than twice as large in relation to GDP as now) citizen-creditors just about held it all. He concludes that the link is broken and "for all practical purposes, the venerable marriage between public credit and democratic government, so vital a factor in the history of the world, has been dissolved." "

The result seems to be that those who owned more public debt had more say in running the government says Ehud Kaufman in 2010 Return Public Debt to the Public 
"Citizens in the democratic countries need to reclaim control of their government debt, in order to revitalize the democratic institutions that have been weakened in the last three decades."

For the US, the 'overriding fear driving economic policy has been debt hysteria' is leading to permanent unemployed says Paul Krugman. Compared to Europe, there has been recovery in US but only for the top 7% says Paul Salmon. According to James Surowiecki the underground economy in US is now of the order of two trillion dollars.For another take on austerioty see Mark Blyth  The Austerity Delusion.

1 comment:

gaddeswarup said...

P.s. Link to James Galbraith review