The notional debt
Where does the idea of an Australian debt crisis come from, and what does it mean?

The economic common sense peddled in contemporary Australia is that we are a high-taxing, high-spending, heavily indebted country burdened with terrible cost of living pressures and a welfare system that is too generous, and that something has to be done about it. Does this stack up? Perhaps the best comparison for Australia is other developed nations grouped in the Organisation for Economic Cooperation and Development (OECD).

High taxing? Thirty of the OECD’s 34 member countries have a higher total tax take as a proportion of their economy (GDP) than Australia. And 26 OECD member countries have higher taxes on the average worker as a proportion of their labour cost than Australia. High spending? Twenty-nine OECD member countries have higher general government expenditure as a proportion of GDP than Australia. Heavily indebted? Twenty-one OECD member countries have higher general government debt as a proportion of their GDP than Australia. Burdened with terrible cost of living pressures? Twenty-four OECD member countries have higher inflation rates than Australia’s modest 1.7% annual growth in consumer prices. Saddled with a welfare system that is too generous? Twenty-three OECD member countries have higher public “social expenditures” as a proportion of GDP than Australia.

Yet who acknowledges – or even knows – that Australia is a lightly taxed, moderately indebted, low-inflation nation compared to most other developed countries? The false view pounded into us by conservative politicians and their fellow-traveller pundits could lead to very bad policy decisions in a global economy that faces being led by Europe and Japan into a long, slow deflation, which is what today’s extraordinary and historic negative interest rates in Europe portend. Computer scientists call it GIGO: garbage in, garbage out. Poor inputs, poor outputs. How stupid would we be to make important decisions on the basis of poor data?

Debt is the central issue of international politics, the anthropologist David Graeber argues in his book Debt: The first 5000 years – and as we know, of Australian domestic politics too, in its latest guise as a scare attached to the ageing population – yet “nobody seems to know exactly what it is, or how to think about it”. This is surprising since conflict historically has frequently taken the form of struggle between debtors and creditors: “arguments about the rights and wrongs of interest payments, debt peonage, amnesty, repossession, restitution, the sequestering of sheep, the seizing of vineyards, and the selling of debtors’ children into slavery”. For 5000 years, Graeber says, popular insurrections have begun with the ritual destruction of debt records on tablets, papyri and ledgers, as well as of landholding records and tax assessments. He cites classicist Moses Finley, who argued that revolutionary insurgencies in the ancient world had one goal: “Cancel the debts and redistribute the land.”

The lack of insight into debt as a cultural phenomenon is even more surprising, Graeber continues, when one considers the deep entwinement of the languages of religion and debt that emerged from these repeated conflicts. “Terms like ‘reckoning’ or ‘redemption’ are only the most obvious, since they’re taken directly from the language of ancient finance,” he says. “In a larger sense, the same can be said of ‘guilt’, ‘freedom’, ‘forgiveness’, and even ‘sin’. Arguments about who really owes what to whom have played a central role in shaping our basic vocabulary of right and wrong.” Graeber is not alone in this analysis. The German word for debt is Schuld, synonymous in German with “guilt”. As former EU Commission deputy director general Lars Hoelgaard points out, in Germany this translates directly into “moral obligation”. That “debt is sinful” is a “moral dogma” for the Germans, Hoelgaard argues: “‘Live within your (current) means; don’t spend more than you earn’, as if societies were like a private household.” Knowing that helps explain the disjuncture in Europe between Germany and, say, the Mediterranean EU countries.

What about in Australia? Here, debt is less a moral instrument than a cudgel wielded crudely and brutally by conservative governments to discredit their predecessors and maintain a hold on power. There is a ritual. First the incoming conservative government gasps, “My God, the cupboard is not only bare but that rotten lot you’ve just tossed out left the nation in hock up to the neck!” The term “budget black hole” is incanted menacingly in relation to fiscal policy settings (econospeak for the state of the budget) and public sector debt. The new government vaunts itself as the morally and technically superior team to fix it. Second, the incoming government has a savage first budget to set up a pattern of public spending that reflects its own ideological and policy priorities. Third, it backloads new and higher spending into its third budget, the pre-election budget, which it studs with sweeteners to help get itself returned to office. Fourth, large, expensive publicly paid ad campaigns around key government policy initiatives are rolled out to gild the government’s policy bona fides before, as the campaign proper begins, the cry goes out in highly emotive paid party- political advertising: “Don’t risk a return to our economically illiterate predecessors – those wreckers will send you, your children and the rest of the nation to the poor house!’

We can feel like fiscal fools, debt dunces, investment ignoramuses when it comes to economics, lacking the expert knowledge, except in extremis, to know with confidence when we are being had. Financial year 2014–15 turns out to be one of those extraordinary moments where citizens did not respond to the siren alarm of debt and imminent disaster alleged by the government. The ritualistic government script that there was an urgent debt and deficit problem was rejected; unfair budget cuts meant to fix the bogus budget crisis were condemned. In a reassuring example of our political system working exactly as it should, those unfair measures failed to pass the Senate where the government does not have the numbers.

It is worth pausing and reflecting on this amazing moment where the people via their parliamentary representatives called a government’s bluff on its economic rhetoric. A cynic might say it was just self-interested citizenry at work. However, even John Howard declared, in implied criticism of the budget spinning its wheels in parliament, that people will “respond to an argument for change and reform … (if they are) satisfied it’s fundamentally fair”. It was not. Which is not to say there are no challenges that need to be dealt with, including sensibly reducing the deficit over time; just not in a swingeing attack conducted in a hysterical manner on the bit of the public sector Australia has left after decades of economic policy too laissez and not fair.

The failure of the conservatives’ ritual debt and deficit scare to work for the Abbott government momentarily negated debt’s utility as a political cudgel. The fiscal anorexia the government attempted to foist on us did not take: we looked into the budget mirror and saw ourselves as we are, “prosperous” looking but not loaded up with the grotesque layers of debt they wanted us to imagine.

 

This is an edited extract of “An Emotional Debt” by Chris Wallace, first published in Meanjin, Vol 74, No 2, June 2015.

Chris Wallace

Chris Wallace is a journalist and the author of Germaine Greer, Untamed Shrew and The Private Don.

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