Debt and the Limited Imagination of the Left

Debt. Debt is constantly looming at us. It is now a key element of the political-ideological constellation of our time. Debt expresses both the current crisis of capitalism in its economic guise and also the ‘representation of the imaginary relationship of individuals to their real conditions of existence’(Althusser, 2008, p. 36). Debt is pervasive, all encompassing and seemingly inescapable.  The debt of Australian households is steady at 150% of income(Reserve Bank of Australia, 2013). If Australians only spent at the levels of their income it is more than probably that great sections of capital – especially retail – would no longer be viable. The majority of debt is tied up in mortgages: the major asset of most households is not only purchased by going into serious debt but only can maintain its value because the society as a whole is steeped in debt.

percentage-of-annual-disposable-income.ashx  Graph: (Bird, 2013)

It was the US Sub-Prime Mortgage crisis that triggered this current, seemingly permanent, economic malaise – and it is now sovereign debt, that is the debt of states, that is the part of its current manifestation. (Neither are the source of the crisis itself – for that you need to look deeper into the structure and history of capitalism.) The sharpest expression of this is the looming possibility that the US will not raise its debt ceiling and thus be compelled to either drastically cut state expenditure or default on its debt. Since US debt, in the form of Treasury Bills, make up a core component of the global economy, such a default would, in the words of IMF Christine Lagarde ‘…cause serious damage to the US economy, but also to the global economy as a result of the spillover effects.’

The dominant commentary of this crisis, a commentary shared by almost everyone except the US Tea Party and the libertarian Right, is that this current crisis is one in which the ideological commitments of the Republicans ‘Newest Right’ is the main culprit. The problem is that a certain section of the political class are causing a systemic breakdown by holding to their crazy ideas rather than following good technocratic common-sense. There is even a neat little song about it.

Its is more than probable that some kind of deal will be reached and the can of US debt will be kicked further down the road… so this debate will happen all over again in a few months, maybe a year, depending on the deal.

Whilst there is no doubt that the ideological position of the Newest Right is somewhere between nutty and fucking terrible we should stop and pause when we realise that much of the Left is in agreement with the IMF. Not simply because we should always be contrarians but if we take seriously that the IMF are as close as we get to custodians of the global health of capital what does it mean to share their analysis? (Not that we should ignore what they say or not read the material they produce – which is often a great source of information.)

There is a problem with an analysis of debt that sees the issue as the ideas of the Right. If we harp on about the insanity of the Tea Party (something that is pretty easy and fun to do for those of us outside the USA as it morphs too easily into a broader ‘Only in America’ head-shaking that we like doing) what we miss is the greater insanity of the debt itself. And this insanity is due to the irrationality of the current period of capitalism and capital itself more broadly.

To summarise to the point of over-simplification finance is an inherent part of capitalism. By the mid-1970s the post-war Fordist and Keynesian mode of capitalism had been knocked off its kilter by the global struggles of the masses (cf. Hardt & Negri, 2000; Midnight Notes Collective, 1992; Prashad, 2012). Capital’s response to this was a fundamentally restructuring of the global composition of capital. This involved in no small part a shift of more and more capital into finance. Whilst finance capital has its own specific dynamics it is a mistake, as many do, to make a distinction between good productive industrial capital and bad speculative finance capital. (Both Smith and Keynes make this error). Rather ‘we are in a historical period in which finance is cosubstaintial with the very production of goods and services’(Marazzi, 2011, p. 28). It is meaningless to try to separate finance capital from the circulation and accumulation of capital on a whole.  Since the early 80s both corporate activity and household expenditure were only possible through their enmeshment in global financial flows. At the core of this state debt, especially the debt of the US, underpins the whole system(Varoufakis, 2011).

When this exploded in 2007 the state attempted to keep the balls of capital in the air by inhaling much of banks’ and financial institutions’ debt (Lapavitsas et al., 2010; Varoufakis, 2011).

Thus US debt has been increasing sharply since the early 80s (and more generally since the end of the WWII).


The growth of finance capital/debt was a path capital was trying to take to escape from its own limitations and opposition.

The increase in sovereign debt has been used to justify the politics of austerity across the globe – including in Qld. For opponents of austerity it is thus very appealing to argue that debt isn’t a problem but right-wing ideology is. Since Reinhart and Rogoff’s ‘Growth in a Time of Debt’  was shown to have basic excel coding flaws this line of argument has become increasingly appealing. As Krugman, a powerful voice for classic Keynesian debt financed stimulus, argues: ‘What the Reinhart-Rogoff affair shows is the extent to which austerity has been sold on false pretenses.’

It is understandable how tempting this argument is. Rather than having to deal with facing the reality of a secular crisis of capitalism we can lay the blame at the feet of bad people and bad ideas: the Right and neoclassical economics. Also rather than having to try to do the seemingly impossible of imagining viable alternatives to capitalism and paths of social transformation the Left can continue to argue for some form of social democracy or ‘capitalism with a human face’(Žižek, 2000, p. 63).

Bad ideas and bad people. This has been the dominant framework of critique for the Left throughout the 21st century. And it leads us to a dead end. See the current fad of Fuck Abbot-ism.  Such a politics backs away from having to confront that a) capitalism is in a system crisis b) the politics of the Left as it is has little to offer rather than the illusion that social democracy is still possible.

What happens though when we realise that debt isn’t an illusion but is both a structural crisis in capitalism and also a power-relationship (Lazzarato, 2012)? The Queensland Commission of Audit justifies its plan to fundamentally reshape the provision of services by the state as follows:

  • first, to arrest the deterioration in the State’s financial position and stabilise the position
  • second, to pay down debt to restore Queensland’s financial strength and regain its AAA credit rating.(Queensland Commission of Audit, 2013, p. 3)

Credit rating agencies have the power to impact the interest rates that states borrow at. This isn’t an illusion. Peter Costello didn’t make this up. Rather in a historic moment when finance capital is intertwined throughout capitalism on a whole these ‘agencies are in the service of the financial power bloc and represent one of its strategic weapons’ (Lazzarato, 2012, p. 99). And finance capital isn’t some parasitic force against productive capital, rather it is here where capital becomes ‘the common capital of the class’ the purest expression of the endless process of valorization (Marx, 1991, p. 490).  Thus when this historical organization of capital heads into crisis this is one of the tools used to make sure capital remains viable against the demands and lives of everyone else.

Right-wing politicians, Left-wing politicians, the difference really, when we dig down into it, doesn’t matter. I say this not from some anarchist position ( which is honorable and valid) but from the realization that the state is just a node in capitalist power and the Right and Left merely pose different strategies for the managing of the crisis. The crisis is systemic.

What would we do if in a few days the improbable happens and the US defaults on its debt? Lending would freeze, the value of the T-Bills that states, corporations and God knows who else holds ( your super fund?), would plummet, and these organizations would face a challenge to their viability.  What would we argue for? For keeping the post-social democratic status quo going? As exports try up and companies can’t borrow would it make any sense to argue for the state, which would now face another drop in its income, to keep on paying for things it can’t afford? As corporations face crisis could we even demand more taxation on the rich? The failure of the imagination of the Left is that even in crisis it’s political aspirations are built on a form of activity that is at its marrow is contingent on a viable form of capitalism. And if the improbable doesn’t happen something like it happening somewhere across the terrain of the globe is far more probable.

If austerity is capital’s plan A and if the Keynesian plan B is an illusion then we need a Plan C. Unless we can develop a politics of class struggle aimed against and beyond the world of value – that is a politics of the commons – we have nothing to say(Federici & Caffentzis, 2008; Midnight Notes Collective and Friends, 2009). That is not to say that the fights that are happening now over wages and conditions, against cuts, in defense of ecologies and against state brutalities and inequities should cease. We need them, they must continue. But for them to be add up to something more, something we need, a shift is required in our thinking, a shift that is difficult, unpleasant, perhaps exhilarating and necessary.

Althusser, Louis. (2008). On Ideology. London  New York: Verso.

Bird, Jodi. (2013). Fretting about mortgage debt? Australian households have experienced a spike in debt over the last two decades.   Retrieved 13th October, 2013, from

Federici, Silvia, & Caffentzis, George. (2008). “Must the Molecules Fear as the Engine Dies?” Notes on the Wall Street “Meltdown”.

Hardt, Michael, & Negri, Antonio. (2000). Empire. Cambridge, Massachusetts & London, England  Harvard University Press.

Lapavitsas, Costas, Kaltenbrunner, Annina, Lindo, Duncan, Michell, J., Painceira, Juan Pablo, Pires, Eugenia, . . . Teles, Nuno. (2010). Eurozone crisis: beggar thyself and thy neighbour. Journal of Balkan and Near Eastern Studies, 12(4), 321-373. doi: 10.1080/19448953.2010.510012

Lazzarato, Maurizio. (2012). The Making of Indebted Man:  An Essay on the Neoliberal Condition (J. D. Jordan, Trans.). Los Angeles: Semiotext(e).

Marazzi, Christian. (2011). The Violence of Financial Capitalism (New ed.). Los Angeles: Semiotext(e).

Marx, Karl. (1991). Capital: A Critique of Political Economy (D. Fernbach, Trans.  Vol. 3). London: Penguin Books in association with New Left Review.

Midnight Notes Collective. (1992). The New Enclosures. In Midnight Notes Collective (Ed.), Midnight Oil: Work, Energy, War 1973-1992 (pp. 317-333). Brooklyn,NY: Autonomedia.

Midnight Notes Collective and Friends. (2009). Promissory Notes: From Crisis to Commons.  Retrieved 28th March, 2010, from Notes.pdf

Prashad, Vijay. (2012). The Poorer Nations : a Possible History of the Global South London,  Brooklyn, NY: Verso.

Queensland Commission of Audit. (2013). Executive Summary of the Final Report. Queensland Commission of Audit,.  Retrieved 25th March, 2013, from

Reserve Bank of Australia. (2013). Financial Stability Review September 2013.   Retrieved 13th October, 2013, from

Varoufakis, Yanis. (2011). The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy. London & New York: Zed Books.

Žižek, Slavoj. (2000). The Fragile Absolute – or, Why the Christian legacy is worth fighting for. London & New York: Verso.

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