Contagion, debt and the economics of extortion

Its funny how some words get used in ways that we understand and in other ways that we don't. For example the word contagion is increasingly being used to describe the process by which confidence in a national economy dissipates. There are no specific rules outlining exactly when it is that an economy becomes infected with the contagion, but at some point in time they are and at that point everything becomes more expensive and a nation becomes economically unviable. The recent problems in the US are just the latest example of this.

The interesting thing is that, many of the economies that are now in trouble, are in trouble because banks and rating agencies have decreed that current levels of debt are unsustainable and because of that are raising interest rates. Of course there is no mention or consideration of the fact that much of that indebtedness arises out the steps that countries took to protect the savings of their countries investors. Or that the act of increasing interest rates makes the possibility of default all the more likely. The association of a national economy with the notion of contagion is enough of an excuse to heap overtly political pressure on government's to reduce their spending.

The ironic thing is that the uncertainty within the global economy did not start because people had concerns about levels of government debt. It started because banks exposed themselves to speculative investments and in the end had to be bailed out by the governments that they are now manipulating for additional and exploitative rates of interest. The paradox heaping misery on irony, is that for some countries the bank bail outs represent a significant proportion of the national debt that is being to justify the extortion that they are experiencing.

But as the example of the US makes clear, contagion is not just about debt. Contagion is about the scope and scale of the state and the things that the state can be responsible for. In the US the scope of the state and its responsibility is not seen as a political priority. It may well have been acceptable to rescue the banking system; it may be seen as a priority to spend an enormous proportion of their GDP on the ability to invade other countries.  But the well being of the poor and the disadvantaged is not seen as something that is in anyway the responsibility of the country's government nor of its rich and its middle classes.

So when Republicans, the T.E.A. Party and our own George Osborne use the idea of contagion to argue for a shrinking of the state.  The contagion they really fear is the contagion of care and mutual dependency. They fear having to accept that the poverty of their fellow citizens is not the responsibility of an individual's indolence but rather the product of their own ideology. An ideology rooted in the narrowness with which they conceptualise humanity and of their own need to be indifferent to the suffering of their fellow citizens.

The current economic crisis is not about debt; its about people, its about a financial system that is yet again being allowed to exploit the gullible and its about right wing politicians who would rather spend a government's money on the state's power than on it responsibilities.