I was getting annoyed at my radio this morning, as the dulcet-toned pseudo-liberals on NPR called the Greek Government “radical left”. Why is a simple request for rescheduling/partial write-off of debt repayment so radical? It is just basic neo-Keynsian economics. Fact-based and thus liberal, yes, but hardly “left-wing” much less radical.
Krugman explains. And now I understand.
This is an old debate.
Writing to George Washington on 23 October, 1786, Henry Knox complained about the Shays Rebellion:
“The people who are the insurgents have never paid any, or but very little taxes — but they see the weakness of government; they feel at once their own poverty, compared with the opulent, and their own force, and they are determined to make use of the latter, in order to remedy the former. Their creed is ‘That the property of the United States has been protected from the confiscations of Britain by the joint exercise of all, and therefore ought to be the common property of all.’ … In a word, they are determined to annihilate the debts public and private and have agrarian laws, which are easily effected by means of unfunded paper money which shall be a tender in all cases whatever…”
Justice Marshall, in his Life of Georg Washington, succinctly described the antidote prescribed by the Founders:
“The distresses of individuals were, they thought, to be alleviated only by industry and frugality, not by a relaxation of the laws or by a sacrifice of the rights of others. They were consequently the uniform friends of a regular administration of justice, and of a vigorous course of taxation which would enable the state to comply with its engagements. By a natural association of ideas, they were also, with very few exceptions, in favor of enlarging the powers of the federal government.”
The Greeks seem to be encountering what Jefferson’s camp encountered: when left wing communists are crushed by onerous debt and seek debt relief in the form of “a relaxation of the laws or by a sacrifice of the [property] rights of others,” the solution is austerity and centralized stalinism.
Marx was a Jeffersonian who idealized the industrial worker instead of the rural farmer. The Founders were authoritarians who felt “nothing but a permanent body can check the imprudence of democracy” (Hamilton), that “the evils we face flow from the excess of democracy” (Elbridge Gerry), that “the Danger to Free governments has not been from freeholders, but from those who are not freeholders,” (John Dickinson), and that the problems of the nation can be traced to “the turbulence and follies of democracy.” (Edmund Randolf).
The stalinist threat to freedom posed by the Founding Fathers was recognized in its day: In the Boston Gazette and Country Journal, 26 November 1787, we find the warning:
“Those who have long been wishing to erect an aristocracy in this COMMONWEALTH — their menacing cry is for RIGID government, it matters little to them of what kind, provided it answers THAT description.”
Those under siege saw what Marshall saw.
The siege was also itself recognized in its day. John Taylor of Caroline, a close associate of Thomas Jefferson, viewed society as composed to two warring classes: creditors and debtors.
In 1814 Taylor wrote of the lender and debtor classes: “One interest is a tyrant, the other its slave.”
His use of the word “slave” was not wholly metaphorical. He continued:
“In Britain, one of these interests owes to the other above ten hundred millions of pounds sterling, which would require twelve million slaves to discharge, at eighty pounds sterling each. If the debtor interest amounts to ten millions of souls, and would be worth forty pounds sterling round, sold for slaves, it pays twelve and a half percentum on its capitation value, to the creditor interest … This profit for their masters, made by those who are called freemen, greatly exceeds what is generally made by those who are called slaves.”
As a slave owner himself, John Taylor saw that putting a man into debt was about the best investment an aristocrat could make — more profitable even than owning that man outright along with all his economic output.
One principle advantage to putting a man into debt compared to owning that man outright is that a debtor feeds, clothes, and shelters himself, whereas a slave is dependent on these counts.
A lot of today’s tumult is being played out in an environment where interest rates once considered illegal usury have been increased dramatically (Depository Institutions Deregulation and Monetary Control Act). In his “Defence of Usury” of 1787, Jeremy Bentham wrote:
“In a word, the proposition I have been accustomed to lay down to myself on this subject is the following one, viz. that no man of ripe years and of sound mind, acting freely, and with his eyes open, ought to be hindered, with a view to his advantage, from making such bargain, in the way of obtaining money, as he thinks fit: nor, (what is a necessary consequence) any body hindered from supplying him, upon any terms he thinks proper to accede to. ”
Today we call this “deregulation.”
We also have Bentham to thank for the principle of the Panopticon (1787), the full title of which reads:
“PANOPTICON; OR THE INSPECTION-HOUSE: CONTAINING THE IDEA OF A NEW PRINCIPLE OF CONSTRUCTION APPLICABLE TO ANY SORT OF ESTABLISHMENT, IN WHICH PERSONS OF ANY DESCRIPTION ARE TO BE KEPT UNDER INSPECTION; AND IN PARTICULAR TO PENITENTIARY-HOUSES, PRISONS, HOUSES OF INDUSTRY, WORK-HOUSES, POOR-HOUSES, LAZARETTOS, MANUFACTORIES, HOSPITALS, MAD-HOUSES, AND SCHOOLS: WITH A PLAN OF MANAGEMENT”
Today we call this both “the surveillance society” and “normal.” So it goes.
Actually, the irony here is that the Greeks are much less radical than the Shay’s rebellion crowd. The Greeks are willing to keep making payments, just want the same deal we give a corporation in a workout — a partial writedown, and a reasonable payment plan that leaves the enterprise as a going concern. The Greeks are not challenging the system’s foundations at all. Yet.