Greece and the Idea of Debt

DebtThe Greek sovereign debt crisis reached a climax early this week when, in an impromptu popular referendum, Greeks overwhelmingly rejected the terms of the bailout package offered by Eurozone leaders and the troika (the European Commission, European Central Bank, and International Monetary Fund).

Of the many reactions to the impasse, the one getting the most attention may be the interview of economist Thomas Piketty in the German newspaper, Die Zeit. Piketty accused Germany’s leaders of a “shocking ignorance of history.” “When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid,” said Piketty, “then I think: what a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations.”

Some have dismissed Piketty’s indictment by pointing out the imperfections of his historical analogy—the ways in which Germany’s situation in 1953 is different from Greece’s today. No historical analogy is perfect, and in the case of the London Agreement on German debt, the differences as well as the similarities can be illuminating. It is worth noting, however, that both Piketty and his critics tend to analyze the crisis as an economic problem. This is a mistake.

The European Union is first and foremost a political project rooted in the post-WWII desire to prevent another general European war. Long before the common currency, the first institution founded to promote this goal was the European Coal and Steel Community. France and Germany sought to integrate their coal and steel industries not primarily for economic reasons, but so neither nation could mobilize for war without the knowledge and cooperation of the other. Coal and steel, like the common currency, were meant to bind European nations ever more tightly together, so that mutual dependence would ensure peace and build community. Rather than ask whether debt forgiveness makes economic sense, then, perhaps it’s more important to ask what kinds of debt advance this political project. And, given this political framing, to ask what sense of justice Greeks were expressing in the resounding “no” of last Sunday’s referendum.

The foundation of any healthy human society is cooperation and reciprocity. While debt may at first glance look like a manifestation of these, it’s actually a perverted form that becomes their opposite. What’s special about reciprocity—what makes it the glue of human community—isn’t the one-for-one exchange of loans and repayments (let alone interest payments). What’s special is the blurring of the lines between the individual and the community. When you help a neighbor, you don’t expect to be repaid exactly and on time. You expect that the neighbor, who knows you and lives where you live, will help you in a different and inevitably unequal way when and if you most need it. You may give an egg, but you don’t expect an egg back. You expect sugar, or a cordless drill. Both you and your neighbor assume that you’re better off helping each other, because you live together, and cooperation makes you stronger. That’s reciprocity. That’s community.

Debt, on the other hand, is distinguished by the quantification of what’s given, and the enforcement of its return—usually with interest, though this isn’t the defining attribute. Quantification means keeping exact track, and expecting exact repayment. It implies a lack of trust in the other party’s goodwill or mutual benefit. Enforcement means police and violence, or the threat of it. This can be direct, physical, and bloody; or it can be indirect financial enforcement, via impoverishment, malnutrition, foreclosed housing and healthcare, or long-term unemployment. But because debt’s defining features are quantification and enforcement, it can’t be considered of a piece with the reciprocity and cooperation that hold human societies together. It is a perversion; it’s the opposite.

The Tribute Money, George Hayter (1817)

Anyone really looking to see what debt is, at its core, will find that it’s much closer to that other near-universal of human societies: war. As anthropologist David Graeber argued in his remarkable book Debt: The First 5,000 Years, debt often serves to create or restore hierarchical politics within the institutional frameworks of communities formally based on political equality. Interest on an unrepayable debt is no longer the economist’s fee paid for use, but tribute exacted by conquerors; the triumphant use victory in the market to claim moral superiority, just as victors on the battlefield inevitably do. The illusion of community and right may persist, but only because the war is hidden behind a veil of debt.

Europe’s financial institutions and Germany’s political leaders came to Greece to enforce repayment of a debt. Their spiteful and ham-handed enforcement made Greece much poorer over the last five years, and much less able to pay. Yet they have refused to accept even partial responsibility, and continue to insist on the original terms of repayment anyway. As James K. Galbraith reports, they insist as well on their right to remake Greek society by diktat.

There may be other ways to resolve the crisis and rescue the community, if the creditor powers could acknowledge shared responsibility and work toward the goal of mutual benefit. Economist Marie Duggan, for example, recently revived a plan John Maynard Keynes proposed for Britain’s debt crisis in 1944, in the midst of WWII. Keynes’s plan required creditors as well as debtors to make adjustments, cooperatively, and replaced the trap of short-term loans with long-term investment (but without massive shock-doctrine privatization). The idea is to re-align institutional incentives “so that the creditors only gain when the debtors themselves grow.” But Germany and the troika, captive to their commercial lenders and blinkered by their sanctimony, have rejected any proposal that makes demands of creditors.

Now the Greeks have said, that isn’t cooperation. That isn’t reciprocity. That isn’t community. The only question remaining is, will Germany and the troika destroy the community to prosecute their financial war against Greece? And, if they do, will the rest of the world, in solidarity and community with Greece, call them to account for the debts they never repaid?

The “economic” is always moral and political at its root. Creditors will always proclaim their moral superiority, and grasp after political supremacy. The Greek government may yet concede both. In the meantime, thank goodness the Greek people reminded us to think about community, reciprocity, and justice when we talk about debt.

Eric Frith is a doctoral candidate in Latin American history at Columbia University, a former intelligence officer in the US Air Force, and assistant professor of history at the US Air Force Academy in Colorado Springs. His research focuses on the history of political and economic thought in Europe and Latin America, and the emergence of the economy as a distinct field of knowledge. He also writes about religion and politics in the modern world, and has begun work on a history of suicide.

For other ToM coverage of the Greek crisis, see:

Why German Economic Thought Made the Greek Crisis Inevitable