Debtors’ Prison: The Politics of Austerity Versus Possibility
One of the things Robert Kuttner’s Debtors’ Prison does well is it ties together many of the individual fights progressives are battling over into a general argument for why our economy is broken 5 years after the Great Recession began. There are those fighting both Republicans and some Democrats on topics ranging from austerity to foreclosure relief and financial sector accountability, while there are fellow activists in Europe fighting against the European Central Bank’s policy of tight money and anti-democratic takeovers of local policy.
Kuttner’s book uses debt as the key entry point into what is going on. Early on he jokes that a book called “Debtors’ Prison” in this intellectual climate would likely be a book about how Social Security and President Obama are robbing young people of their prosperity. Instead Kuttner pulls together a common narrative among liberal economists – that a balance sheet recession of collapsed housing debts is holding back the economy – and builds it out in a historical context. Detailed stories of Daniel Dafoe’s experience with creditors to the history of the United States’ bankruptcy code populate the pages of this book.
In this story an increase in government debt is necessary to counter private sector deleveraging This is even more important with the Federal Reserve at the zero lower bound, trying unconventional policies to boost the economy. With the “fiscal multiplier” in effect, more spending helps the larger economy, while austerity cuts even deeper than it normally would; also finding a way to write down bad debts, a move avoided by both the Tea Party and the administration at key points, would help the economy.
Another thing the book does very well is filling in a lot of the conversations that go missing here. Building off an excellent 2011 American Prospect piece, which argued that debt politics ”pits the claims of the past against the productive potential of the future,” Kuttners’ book is one of the best at pulling together how our history of debts are playing out in the current environment. Both political philosophers abstractly, and political operatives practically, spend a lot of time arguing about how the pie of economic growth should be divided. This was the kerfuffle over the “you didn’t build that” comment from last year.
Neither, however, spend much time arguing about how we should think of what happens when things go wrong. Kuttner shows how the law shifts so that those who take over companies can find it easy to remove pensions, while consumers who are struggling to get by can’t discharge housing debt or find their medical bills coming into contact with the criminal justice system. This is an underexamined part of current economic life, and Kuttner has an excellent overview of it.
The final excellent thing about the book, which is a happy accident, is how well timed it is. Right now, between the IMF and general consensus pushing back against austerity, the Reinhart/Rogoff argument about debt cliffs collapsing and concerns about the US government’s deficit collapsing too quickly, it seems like the arguments of Debtors’ Prison could find a greater audience — especially among people who want to understand how both the collapse happened and why the recovery has dragged on so long. The orthodoxy of austerity that took an intellectual hold after 2011 is starting to collapse. But will that turn into any kind of political action?
Join me to discuss the book with Robert Kuttner.
[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions. Please take other conversations to a previous thread. – bev]