Words&Dirt

“We ignore the blackness of outer space and pay attention to the stars, especially if they seem to order themselves into constellations. ‘Common as the air’ meant something worthless, but Hackworth knew that every breath of air that Fiona drew, lying in her little bed at night, just a silver glow in the moonlight, was used by her body to make skin and hair and bones. The air became Fiona, and deserving––no, demanding––of love. Ordering matter was the sole endeavor of Life, whether it was a jumble of self-replicating molecules in the primordial ocean, or a steam-powered English mill turning weeds into clothing, or Fiona lying in her bed turning air into Fiona.”

––The Diamond Age: Or, a Young Lady’s Illustrated Primer, by Neal Stephenson, loc. 1031

“Reckless indebtedness leads to crisis. More often than not, the culprit is debt that results from the cycle of financial speculation and crash. After a crisis, debt relief is necessary for economic recovery. Avoiding moral hazard is a proper issue for averting the next crisis. Prevention of disabling debt is better achieved by adequate regulation of credit before the fact than by erecting prisons for the casualties of the last crisis. Intelligent people seem to have a very hard time grasping that paradox.

One reason for this myopia is that the pragmatic question of debt relief after a crisis is complicated by relations of power and privilege. Debt, as we have seen, is not just a means of financing investments or addressing public needs; it is part of a system for maintaining social relations or geopolitical advantage. In the collapse that began in 2007, the most toxic forms of debt were those incurred or promoted by banks. Banks, nonetheless, have retained the power to block debt relief for others. So have powerful nations. Today, entire economies are enlisted in the service of repaying old debts, even though debt relief would be far more efficient and far more socially just.

As we saw in the story of Daniel Defoe and the invention of modern bankruptcy, debt relief has been replete with double standards since its inception. Intermittent acts of mercy, case by case, were a poor substitute for national macroeconomic policies. As late as the nineteenth century, nations did not have the institutions or insights of modern economics. The banking system was badly regulated and chaotic. Only Britain had a central bank, and its bias was deflationary. Demands for respite from depression in the form of cheaper credit or bankruptcy reform were ad hoc and episodic. There was no coherent conversation about what today would be called countercyclical policy to temper the tendency of markets to overshoot on either the upside or the downside.

In the twenty-first century, governments have a modern arsenal of economic management institutions: central banks, instruments of fiscal and monetary policy, and highly refined tools of financial regulation and bankruptcy law. But they keep repeating the mistakes of the nineteenth century. What has not evolved with the institutions is the distribution of political power. If anything, financial elites enjoy far more concentrated influence than at any time since the Gilded Age. Thus the policy mistakes are not errors of judgment but the natural products of a lopsided politics.”

––Debtors’ Prison: The Politics of Austerity Versus Possibility, by Robert Kuttner, pg. 173-4