The Era of “Debt Capitalism” Has Come to an End

Private debt, public debt and inflation: the drivers of economic growth for the last 40 years. Image: Mikko Saari/flickr

After 40 years of economic growth based on debt, the era of  “debt capitalism” has come to an end, says Wolfgang Streeck. The Managing Director of the Max Planck Institute for the Study of Societies in Cologne gave a remarkable interview (in German) last week that I would like to share with you, in advance of the World Economic Forum‘s meeting in Davos starting today.

Economies must grow in order to increase welfare. This has been the basic requirement for capitalist societies since the industrial revolution. Yet the last time Western societies experienced real economic growth was in the decades following WWII, says Streeck, in his account of recent economic history. Since the 1970s, when this period ended and economic growth slowed, governments started to print money in order to create the illusion of increasing salaries and greater welfare. In reality, however, income stagnated.

When decision-makers realized that high inflation rates could no longer be sustained, they looked for new recipes to keep the economy growing. In the 1980s, they found a solution in increased government spending based on public debt. Ronald Reagan was the unlikely representative of this policy.

Streeck argues that when government debt reached unsustainable levels, the third and final phase of “debt capitalism” (he uses the term Pumpkapitalismus in German) began. From the 1990s on, economic welfare was no longer based on inflation or on public debt but on private debt. Financial markets were liberalized and consumers, especially in the US, were convinced to take out loans in order to pay for their expenses.

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Libya Set to Try Saif? Not So Fast

Newspaper report on Saif's arrest last November. Photo: Wikimedia Commons

It was fitting that news and commentary on justice in Libya was thoroughly confusing today. The conflict in Libya and the post-Gaddafi era have been rife with contradictory storylines: Saif al-Islam Gaddafi was captured. Wait, he’s touring Tripoli! Abdullah al-Senussi has been detained in the south of the country, but we haven’t heard or seen from him since (he is almost certainly not in Libya). International Criminal Court Prosecutor Luis Moreno-Ocampo says Libya can try Saif and Senussi but the Pre-Trial Chamber says ‘hold your horses!’

In short, the narratives emerging from Libya as they pertain to the ICC have been anything but coherent. Even for the most keen observers and commentators, it has been tough to keep track of and distinguish between what was information and what was mis-information.

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The Time Has Come for Economic Reform in Myanmar

Burmese kyat. Photo: onourownpath/flickr

On the eve of a critically important IMF Article IV Consultation Mission to Myanmar, the basic question is: where’s the beef on economic reform?  After over a year of post-election policy debate, meaningful economic reform initiatives have been meager.  Allowing more room for union rights is an important step, and holding national conferences to talk about strategies for poverty alleviation and agriculture sector improvement are extremely welcome.

But the economic underpinnings needed for a successful democratic transition have not yet been addressed.  These include: (a) policy reforms and actions to tackle emerging macroeconomic problems such as exchange rate appreciation and inflation; (b) concrete measures to stimulate the private sector; and (c) reforms in the exchange rate, financial system, investment policies, and state-owned enterprises that address entrenched military interests and control over economic resources that are impeding national economic development.

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International Human Rights Treaties- Curse or Blessing?

The Universal Declaration of Human Rights inside the United Nations Head Quarters. Image: riacale/flickr

A couple of weeks ago the Russian Foreign Ministry released a report, criticizing human rights violations in the United States. By giving examples like the Guantánamo Bay prison, the ministry said that “the situation in the United States is a far cry from the ideals that Washington proclaims”. While the report wasn’t received too seriously by the international community, it nevertheless illustrates an interesting phenomenon in international relations: states using human rights rhetoric regardless of their own human rights record. Prior to Russia, China accused the US of undermining Internet freedom through its campaign against WikiLeaks. While Beijing may have a point, it is nevertheless provocative to hear such claims made by the likes of Russia and China. So are human rights nothing more than a rhetorical tool utilized by states?

Since the adoption of the Universal Declaration of Human Rights in the aftermath of World War II human rights have experienced an institutional expansion at the international level. This resulted in a worldwide system of treaties and other sources of law (including international customary law) that seek to safeguard human rights. Over the last few decades, many countries have become increasingly democratic and free. For scholars of international law, this worldwide relative improvement of human rights is a sign of the success of the international human rights regime. Paradoxically though, results from studies that examine the impact of human rights treaties on state behavior show almost no significant effect. On the contrary, treaties are sometimes even used as a shield to hide worsening state practices.

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Rawls and International Law

The sun setting on justice. Image: mindgutter/flickr

With our Editorial Plan discussing changing international norms and laws over the next two weeks, it is worth remembering that this discussion serves the wider purpose of helping to illustrate the elusive character of structural change in our world today.  One consequence of this approach, at least for this particular discussion, is that we ultimately treat norms and laws as effects of underlying causes – as symptoms, so to speak, of the underlying condition we are trying to diagnose.  A different but complementary approach is that of international political theory, which, as a variety of ‘ideal’ or ‘normative’ theory, often operates (if sometimes only implicitly) on the opposite assumption: that changes in ideas, norms and laws are themselves causes of structural change instead of vice versa. Today we consider an example of this other approach to international norms and laws, by way of a short introduction to the international thought of John Rawls.

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