Thread by @doctorow

It's been just over a year since the death of activist, writer and anthropologist @davidgraeber - a brilliant speaker, writer and thinker who helped give us #Occupy, "we are the 99%" and #BullshitJobs.

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On the anniversary of David's death, his widow @nikadubrovsky convened the first "Art Project" discussion, a fascinating debate between @PikettyLeMonde and @michaelwhudson, a pair of political economists whose work is neatly bridged by Graeber's own.



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Piketty, of course, is the bestselling French economist whose 2013 Capital in the 21st Century was an unlikely, 700+ page viral hit, describing with rare lucidity the macroeconomics that drive capitalism towards cruel and destabilizing inequality

memex.craphound.com/2014/06/24/tho…

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Hudson, meanwhile, is the debt-historian and economist whose haunting phrase "Debts that can't be paid, won't be paid," is a perfect and irrefutable summation of the inevitable downfall of any system that relies on household debt to drive consumption.

pluralistic.net/2020/03/24/gra…

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Like Hudson, Graeber was obsessed with the history and politics of debt. His 2012 book "Debt: The First 5,000 years" influenced not just Piketty's work, but the work of many non-economists, including a large group of science fiction writers.

tor.com/2012/04/16/the…

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Like Piketty, Graeber was capable of writing extremely long books that were so engaging that people actually READ them, absorbing complex and nuanced subjects. DEBT clocked in at 534 pages, and not a dud among them.

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And like both Hudson and Piketty, Graeber was obsessed with long timescales and the ways that history is pressed into service to assert that various political situations are inevitable products of human nature, meaning that there's no point in asking for a fairer system.

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In Debt, Graeber reaches back 5,000 years to question (among other things), the "money story" that money was created by individuals who wanted to make barter more efficient, settling on coins as a way to make change for someone who wants a cow but only has chickens to trade.

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Graeber shows the "confluence of needs" theory of money to be a fairy tale, something that orthodox economists literally made up as the "most likely" source of money, without ever asking historians about what the record tells us about the origins of money.

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Which is a pity, because historians know a lot about this stuff! For example, they can tell you about the Babylonian use of ledgers to record the issuance and redemption of debt in the largely agricultural economy of the day.

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This early money would be recognizable to farmers today: during planting season, a share of the eventual harvest is promised in exchange for the inputs needed to plant, nurture and reap the crops.

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Like Graeber, Hudson also treats Babylonian policy as key to economics - specifically, the Babylonian understanding that "debts that can't be paid, won't be paid," which is why the state would periodically declare a #jubilee in which all debts were declared void.

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Without these periodic jubilees, the entire productive economy is swallowed up by debt service - every poor harvest or other unforseeable circumstance drives producers (who are also debtors) further into debt, whose interest creates an inescapable gravity.

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Without some way to escape debt's gravity, all productive labor becomes oriented toward debt-service, and the economy grinds to a halt. If this sounds familiar, you're probably paying attention to today's political economy:

pluralistic.net/2021/05/19/zom…

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Piketty also works in long timescales, though his historical analysis is an order of magnitude more recent that Hudston or Graeber's. At Capital XXI's core is a data-set, painstakingly assembled by Piketty and his grad students over more than a decade.

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That data-set traces "capital flows" (the distribution of wealth and income) for 300+ years, rigorously traced and normalized, so that we can understand things like the relative degree of inequality in different societies over centuries.

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Famously, Piketty concludes that no matter how fast an economy is growing - no matter how productive its makers are - that wealth grows faster, making the takers who financed growth even richer than the people whose work is propelling the economy.

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This fundamental truth (expressed in economic notation as r > g, or "return on capital is greater than economic growth") means that "meritocracy" is a lie: the richest people in a market economy aren't the people who do the best work, it's the people who started off rich.

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Like Hudson, Piketty's work looks at the relationship between inequality and instability: Piketty uses his data to show that inequality crises trigger political crises, and that high degrees of inequality precede upheavals like the French Revolution and the World Wars.

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Given all that, a discussion between Piketty and Hudson, convened in Graeber's memory, is bound to be fascinating, and they don't disappoint (if you prefer text to video, check out @nakedcapitalism's transcript):

nakedcapitalism.com/2021/09/michae…

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Here's my highlight reel of the discussion, with commentary. Hudson opens with a skeptical take on Piketty's conclusion to Capital XXI, in which he proposes a global wealth tax. Such a tax is nearly impossible to enforce, says Hudson - unlike a jubilee.

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Hudson says the source of today's global vast fortunes is not earnings or income - rather, it's central banks' subsidy of the value of stocks and bonds, through rock-bottom interest rates, bond guarantees, etc. These fuel speculative bear markets that run up asset prices.

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These state-subsidized fortunes are pumped into the financial markets, becoming the loans that everyone else has to pay debt on, just to survive. As in ancient times, the finance sector eventually swallows the productive economy whole. Without jubilee, you get collapse.

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This is true within rich economies, but it's even more pronounced in the relations between poor debtor countries who were coerced into taking on massive debts by the IMF, who are going to pay an ever-larger share of their GDP to offshore creditors as the economy slows.

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The only way for poor countries to service those debts is by imposing crushing austerity, which means starving domestic producers of investment, education and health services, reducing productivity, requiring more austerity - until the whole thing collapses.

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Remember: debts that can't be paid, won't be paid. It's an iron law, and cannot be repealed - not by austerity, not by "better management," not by "living within your means." Can't be paid = won't be paid.

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Piketty doesn't dispute any of this, saying that he's reconsidered some of the solutions in Capital XXI in light of subsequent events, like the pathetically inadequate global minimum corporate tax of 15%, which only rich countries' treasuries will get to participate in.

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Piketty points to his followup to Capital XXI, the even weightier (and sadly less influential) Capital and Ideology for his more up-to-date thinking on the way to address inequality and instability.

theguardian.com/books/2020/feb…

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He reiterates his thesis that inequality self-corrects, thanks to the instability it engenders. Left on their own, market economies collapse, torn apart by the bill for guards to defend lenders' fortunes, the bill for interest payments that enrich lenders.

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Impose sufficient austerity and brutality on a society and the cost of defending it exceeds the wealth its productive sector manages to produce, and boom - French Revolution, the World Wars, etc.

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Piketty proposes that mounting "catastrophic climate change" might precipitate the next crisis, which is certainly a safe bet, though of course, the question is whether that crisis will come after the point of no return for a habitable planet.

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Hudson has ideas about how we might hasten transformative change without risking civilizational collapse. He points out that Piketty's work identifies inherited wealth as inequality's wellspring and points out that estate taxes are much more enforceable than wealth taxes.

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Certainly, inherited wealth is a live issue today. The latest installment of @Propublica's essential #TheIRSPapers reporting shows how the richest Americans abuse a bizarre loophole to avoid ANY tax on indescribably vast estates:

propublica.org/article/more-t…

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No one knows exactly how much tax avoidance grantor retained annuity trusts (#GRATs) drive, because they are shrouded in secrecy. In 2013, the lawyer who created GRATs said they'd allowed the ultra-wealthy to evade $100b in taxes. Their use has increased since then.

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Another lever for reducing inequality is political competition. Hudson points out that during the Cold War, capitalist states took steps to prevent runaway inequality in a bid to show that market economies were more stable than centralized, planned economies.

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Hudson suggests that competition with China might serve that function today. Without forgiving China for its autocracy and human rights abuses, he gives favorable marks to its economic planners for reining in the finance sector.

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It's true that China intervened heavily in credit markets during the covid crisis, to prevent rentiers from destroying productive businesses that couldn't service their debts during lockdown, preserving larges swathes of otherwise vulnerable productive firms.

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He reminds us that the original meaning of "free market" was "a market free from rents," where unproductive creditors were not allowed to lay a private tax on productive manufacturers.

locusmag.com/2021/03/cory-d…

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Today, the meaning has been reversed - a market is "free" if creditors face no limits on rent-extraction.

But there's good reason to be skeptical of claims that China's economy is being well-managed, as @doumenzi writes.

forbes.com/sites/annestev…

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Stevenson-Yang paints a picture of chaotic state management of the Chinese economy, hidden by state-owned media and its rosy outlook. Watchwords like "common prosperity" are empty buzzwords, used to paper over self-interested, corrupt business practices.

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State initiatives measure progress through short-term, easily gamed KPIs, something she says is documented in Red Roulette: "a new book written by a disaffected property developer named Desmond Shum."

simonandschuster.com/books/Red-Roul…

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Now, I'm willing to stipulate that for investors and property developers "corruption" or "incompetence" might be indistinguishable from what the rest of us would call good governance, but some of Stevenson-Yang's charges seem factual and well-made.

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I found the discussion between Piketty and Hudson fascinating, and if there was anything more that I'd add, it would be a dose of technopolitics (unsurprisingly). After all, technology has a huge bearing on the timing and nature of the shifts that both economists study.

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For Piketty, inequality-driven instability collapses when the cost of guard-labor rises too high to bear - other words, eventually, a society gets so unequal that it costs more to stave off guillotines than even the ultrarich can afford.

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For Hudson, debt-driven instability collapses when debtors begin to default because they have no ability to service their debts.

Technology changes the nature of both of these collapses.

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Take guard labor: mass surveillance and technological controls make it cheaper than at any time in history to isolate and neutralize political threats to elite rule.

How much cheaper? Well, in 1989, the Stasi employed one in sixty East Germans to spy on the whole nation.

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Today, the NSA spies on the whole WORLD, at a spy:subject ratio that's more like 1:10,000 - two orders of magnitude more efficient than the spies of a generation ago. That's a huge productivity gain, and it's all thanks to digital technology.

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When it comes to debtor default, the tension is between coercion and ability to pay. Yes, "debts that can't be paid, won't be paid," but "can't be paid" is not a hard limit - it turns on how much the debtor is willing to hurt themselves and their loved ones to make payments.

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Every mafia armbreaker knows this. When someone can't pay their debts, you can break their arm and they'll cash in their kids' college fund and secretly remortgage their house to make the next payment.

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When that runs out, if you threaten to break their legs, the debtor will start breaking into cars. Eventually, this comes to an end, when the debtor goes to prison for 25 years. But in the meantime, coercive force can wring a fair amount of blood from the stone.

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Debtor coercion has been transformed by digital technology, from an artisanal, retail handicraft to a scaled up, industrial practice.

pluralistic.net/2021/04/02/inn…

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We don't need the threat of repo men to keep you paying your car note - miss a Tesla payment and your car will phone home and lock its doors. When the tow arrives, it will flash its lights, honk its horn and back out of its parking space for repossession.

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The ability to digitally repossess, or partially repossess (as in India, where loan-shark cellphone companies disable your most-used apps if you miss a payment) the tools you rely on for life and livelihood makes it cost-effective to apply coercion at scale.

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Cheap guard-labor and cheap coercion mean that crisis can be deferred for ever-longer timescales. Thus, societies up the only kind of debt that really matters: policy debt. Lives are ruined, productive capacity tanked, the planet poisoned.

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Add tech to Piketty or Hudson's analysis and things start to look a lot less self-correcting, and the odds tilt against our civilization, our species and our planet. If a correction only comes after the point of no return, we're in very deep shit indeed.

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ETA - If you'd like an unrolled version of this thread to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

pluralistic.net/2021/09/29/jub…