John Plender, author of Capitalism: Money, Morals and Markets and senior writer at the Financial Times, talks about debt in the capitalist system and what it means for Greece and the eurozone.
In The Economic Consequences of the Peace, written in 1919, the economist John Maynard Keynes referred to relations between debtors and creditors as the ultimate foundation of the capitalist system. That foundation is often rocky, as the battle between German Chancellor Angela Merkel and the Greek leader Alexis Tsipras vividly demonstrated over Greece’s latest rescue package. One of the (many) themes of my new book on capitalism is that a heavy legal and cultural bias in favour of creditors against debtors has prevailed throughout the ages. The bias, as Keynes argued in his assault on the post-war Versailles settlement, can have profoundly damaging political and economic consequences.
The demonisation of debtors goes back at least as far as the Code of the ancient Babylonian king Hammurabi – the first recorded legal code from around 1750 BC. This sets out gruesomely the terms on which a defaulter should sell himself, his wife, his children, concubines or slaves to a creditor, or give his family away for forced labour to discharge unfulfilled debt obligations.
That indicates how the instinctive feeling that saving is virtuous and that debt is deplorable runs deep. And there is a fundamental tension between the ethical notion that people should take responsibility for their actions and the economic and social case for giving people a fresh start. Yet, over time, there has been a growing recognition that penalising debtors is economically counter-productive. No one works like a slave to pay off debts that look insurmountable, while throwing debtors into jail ensures that creditors receive nothing at all.
Interestingly, in the context of current frictions in the eurozone, one of the first examples of liberal thinking on this score occurred in Athens. Around 600 BC, the Athenian constitutional reformer Solon responded to an economic crisis for which excessive debt was partly responsible by introducing laws that scrapped all limits on the rate of interest, reduced or cancelled many debts, and forbade personal slavery for debt.
But that was an exception. A more enlightened view had to wait until English ministers under Queen Anne introduced, in 1706, the concept of legal discharge from debt on partial repayment. The legislation came at a time when debtors accounted for a majority of the prison population.
Since then, the politics of debt have been transformed by universal suffrage. No one is jailed for debt nowadays. And, in the Anglophone world, bankruptcy laws are consciously pro-enterprise. It is no coincidence that a country like the US, whose bankruptcy laws are famously liberal, has an exceptionally vibrant venture capital sector and a very entrepreneurial culture.
Nor is it entirely coincidental that three American presidents – Abraham Lincoln, Ulysses S. Grant and William McKinley – experienced bankruptcy personally, as did a number of great entrepreneurs, including William C. Durant (founder of General Motors), Henry Ford, Milton Hershey, H. J. Heinz and Walt Disney.
In contrast, Germans are among the most unreconstructed, for a host of reasons. Even their language tends to reinforce disapproval of indebtedness. There is an etymological link between debt and guilt in the German word schuld. German conservatism was also a product of history, notably the great Weimar hyperinflation.
Yet German historical memory is peculiarly selective. Germany is the only major developed country to have been the beneficiary of debt forgiveness in modern times. The occupying powers after the Second World War wrote off the great majority of the Nazi-era debt and postponed collection of other debts for nearly half a century. This debt amnesty, which allowed Germany to embark on its economic miracle with a cleaner balance sheet than any of the victorious allies, was extraordinarily magnanimous. Yet, while most Germans can cite the Marshall Plan as an act of post-war American generosity, this larger act of macro-economic mercy has disappeared from the political consciousness of Germany’s current austerity police.
That said, in international debt negotiations, might is right. But the lesson of Versailles, as Keynes understood so well, is that the ultimate consequences of debt realpolitik can be catastrophic. It is a point that should not be overlooked when considering the future of Greece and the eurozone.
Getting Out Alive
From the editor of Radio 4’s Today programme through head of BBC television news, Roger Mosey spent more than twenty years working in senior roles for the world’s most famous broadcaster. From the pressures of handling large scale television events to the burdens and politics of the Olympics, Mosey both shocks and humours in this revealing account of life at the heart of the BBC.
Following her husband’s wrongful arrest for the most sickening of crimes, Faith Clifford was faced with a ten-year legal battle against the police to clear his name. This horrifying yet compelling true story of a blameless couple’s battle with the law provides a unique and shocking exposé of police corruption, and documents the heart-wrenching consequences on all aspects of their lives.
From the award-winning financial journalist John Plender, Capitalism is a fascinating and wide-ranging exploration of the world’s predominant financial system. Plender explores the paradoxical aspects of the capitalist system, not simply through the eyes of economists and business people, but philosophers, novelists, poets and artists.
Hello, hello. Sarah Thrift, Marketing Executive, here.
After just over two fantastic years at Biteback, The Robson Press & Politicos.co.uk, I am off to HarperCollins. It has been an absolute pleasure to deal with our charming customers, meet such engaging authors and make a lot of great friends. Thanks one and all for making my first 'proper job' quite so exciting and eventful.
Particular highlights include: consuming the Parliament cake my mum made for our fifth-year party (pictured here to incite jealousy); the bold, twelve-tea tea rounds of 2014; selling books in eccentric venues without any change; persuading authors to sign 'a few books' and producing 200 copies for them... Not to mention all the brilliant non-fiction I've got to read along the way!
Thanks again for everything.
(Photo taken by the lovely James Wharton)
May is behind us, and we can *tentatively* announce that Summer has begun... Here's some great new books that we've got for you in June (WARNING: Contains political facts and figures, UKIP campaign antics, £££, a secretive institution and a good deal more). Sign up to our newsletter to stay up-to-date with our new releases.
Following Farage: On the Trail of the People's Army
By Owen Bennett
Combining a diary of by-elections, conferences and campaign events with exclusive interviews, Bennett gets to the heart of what makes the People’s Army tick – and who really gives the orders. Following Farage is full of anecdotes about the party that never fails to surprise the political establishment and public alike. A timely, revealing account of the party’s journey to Westminster, based on journalist Owen Bennett’s experiences as he and the press pack followed the People’s Army, and its charismatic leader, on the election trail.
Capitalism: Money, Morals and Markets
By John Plender
Award-winning financial journalist John Plender turns his attention to the paradoxical aspects of capitalism in this critical exploration. Tackling the subject from a variety of perspectives (not just an economist's), this comprehensive book pushes us all to consider the debate surrounding a deep-rooted system which could be under threat.
By Royal Appointment: Tales from the Privy Council - the Unknown Arm of Government
By David Rogers
By Royal Appointment explores the history of one of England’s oldest and most secretive institutions - the Privy Council. Stretching as far back as King Cnut’s reign, right through the Middle Ages, and up to its modern embodiment and functions, Rogers reveals how the institution’s reach has spread to every area of parliamentary and public life.
Thank You for this Moment: A Story of Love, Power and Betrayal
By Valérie Trierweiler
After the highly publicised breakdown of Valérie Trierweiler’s relationship with French President François Hollande, this unapologetic and unadulterated account made headlines on both sides of the Channel in 2014. The No 1 international bestseller returns in paperback to inform, intrigue and shock.
All books will be available on our two week price promise upon publication, so don't miss out!
Iain Dale, MD of Biteback Publishing has acquired world rights to Against the Grain, the memoir of Norman Baker, the former Liberal Democrat MP, and a minister for state at the Home Office.
For eighteen years, Baker was one of the most distinctive, outspoken and campaigning members of the House of Commons, famous for uncovering scandals and exposing conflicts of interest at the heart of Westminster. In Against the Grain he writes of his investigations into the death of David Kelly, the ill-fated flight BA 149, and his exposure of MPs’ expenses, as well as his successful campaign to force the resignation of Peter Mandelson. This compelling account also lifts the lid on the workings of the coalition, revealing much that will be relevant to the new Conservative government, and of interest to the public.
Norman Baker said: ‘I have spent my political life working against the grain: as a Lib Dem, as an opposition MP, as a minister in the junior coalition party, and very often as the champion of unfashionable causes. That was hard but made winning all the more enjoyable. I am delighted to be publishing my book with Biteback.’
Against the Grain will be published in September, and supported by a major press campaign.
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