Meet the Credit Industrial Complex
“We shall all consider ourselves unauthorized to saddle posterity with our debts, and morally bound to pay them ourselves; and consequently within what may be deemed the period of a generation, or the life (expectancy) of the majority.”
—Thomas Jefferson
Today, most of us are indebted. Mortgages, student loans, credit cards for individuals, and budget deficits for nations, especially during war-time. Debt has become big business and credit rating agencies and banks wield not inconsiderable power and influence.
In economics, John Maynard Keynes famously advocated deliberate over-spending or pump-priming to stimulate an economy in recession, but deficit spending was intended as a temporary strategy to lift an economy out of recession only, Keynes never supported the carrying of massive debt.
In international relations and the study of international political economy (IPE) in particular, the late Susan Strange identified four basic pillars of power: security, knowledge, production, and finance/credit. In explaining power and how it is constituted, different schools of international relations have emphasised one base over another. Thus, the realists privilege military power and the marxists proffer production-centred explanations.
The importance of credit and finance has been less covered in scholarly analyses in IR but this is changing quickly both at the international and national domestic levels. While credit and access to credit is the lifeblood of the modern economy, as we all know, domestic debt dependency has hit alarming proportions.
Enter Danny Schechcter, director of the internationally award-winning WMD (Weapons of Mass Deception), an expose of the media’s role in the Iraq War. His latest film is In Debt We Trust, an important investigation of what former Reagan advisor Kevin Phillips calls financialization: the “powerful debt-and-credit industrial complex deliberately engineered by excessive debt.” The documentary is based almost exclusively on the US, but is a worthwhile view and has relevance for many of us outside the US.
The film opens with a nice vignette from a Church with the right kind of idea. Bishop Vernie of the Mt. Carmel Baptist Church in Norfolk, Virginia memorably describes the rationale behind his church’s debt relief leg-up programme: “It’s hard to serve the Master, and the MasterCard”.
RT: 74 minutes
Ah, Ann–having taught economics at Penn State University this is a topic I can sink my teeth into!
Keynes was short sighted–and while he didn’t advocate the carry over of massive debt, he failed to see that it was the natural result of his theory. That is always the failing of socialist economic theory–it doesn’t know where, nor has the ability, to stop.
-Jack
Jack, I had an inkling you’d feel this way about Keynes. I respect your opinion but also think its a value judgment. Its a debatable proposition. I do read critiques as well as celebrations of his work and legacy with interest (no pun intended).
ha! You know me well, Ann! I was an anomaly in the education system–an “originalist conservative” in a university that was all liberal. The only other two “conservatives” there was an engineer and a mathematics instructor. Talk about diversity. (Of course, we know it is always talk…) :)
Hmm…I think it is born out in practice moreso than just a value judgement. It is also supported by numerous examples in history. The problem is, that it has never worked–never been sustainable, and every country in history has eventually faced economic collapse as a result. Keynes attempt to mix morality with economics was like mixing religion with government–a recipe for disaster that has never worked well. The problem with Keynes is that he, like many idealists, desperately wanted to inject his moral imperatives into an amoral concept. He was like many who assigned moral values to economic concepts. For example, Lenin, Stalin–these people actually assigned constructs like “evil” to economic concepts like capitalism–because the failed to see it simply as an economic system–not a political one (or, I have theorized that they actually knew better, but it was simpler to propogandize that way…)
Anyhow, I know we don’t have a lot of room or time, here, but if we did, I always liked to break out my formulas and graphs to render Keynes and his theory obsolete. ha!!
Take care!
-Jack