By Nick Dearden
The first wave of the banking crisis is over. Banks successfully passed their losses onto the public and their profits are once again ‘healthy’. They are now looking to governments to repeat the same trick for them. Greece, Ireland and Portugal are suffering ‘structural adjustment’ policies so that public money keeps flowing to the institutions whose behaviour created the global economic crisis.
Across Europe, and particularly in Greece, people are fighting back – but not simply over the question of ‘who picks up the tab’. They are engaged in a struggle for democracy in its true sense, for an economic system based on a radically different set of values. And they are using models developed by social movements in Southern countries to begin the necessary process of education and empowerment.
Answering tyranny with knowledge
One idea that has fuelled the imagination of activists in Greece and Ireland is for a ‘debt audit’, to throw open their countries’ finances to public examination and analysis. A launch conference was attended by hundreds of people in Athens in May and has united a good portion of the notoriously fractured Greek left. The call has subsequently been taken up by activists in Ireland, with further interest in Spain, Portugal and even the UK.
Sofia Sakorafa is a dissident Greek MP, a former member of the Greek government who quit her party after refusing to sign up to the first ‘bailout’ package in 2010. She believes ‘the answer to tyranny, oppression, violence and abuse is knowledge’ – that public understanding of how the crisis came about, what Greeks are paying and to whom, will help to convince people of the moral bankruptcy of the current financial system and re-ignite a sense of ownership over their economy.
Sakorafa is clear that this is a battle for different values: ‘Beyond speculating market games, there are more valuable concepts. There are people, there is history, there is culture, there is decency.’ The crisis will not be solved by the odd piece of legislation but by a transformation of how individuals and communities relate to power.
The history of the debt audit
The idea of debt audits arose from Southern campaigners with decades of experience in fighting against the capture of their societies by Northern financial interests. After all, the problems of Europe today are a repetition of an old story. Controlling the financial system at national and international levels was a key concern of John Maynard Keynes after he observed the impact of the ‘rule of the banks’ in the Great Depression in the 1930s. Keynes believed in policies that would encourage the ‘euthanasia of the rentier’ through government intervention and control of finance.
As that system of control broke down in the 1970s, the world economy has experienced crisis upon crisis, from the Latin American debt crisis of the 1980s to the currency collapse in Indonesia and Thailand in 1997 and Argentina’s economic crisis in the early 2000s. For the financial institutions based in the North, debt has provided a means of extending the control of the financial sector. People have responded to each instance of crisis by fighting back – usually not with specific policy proposals for a softer form of financial control, but by calls for repudiation of their country’s debts and kicking out those international institutions imposing austerity.
On one level the argument for a debt audit is simply a call for transparency. If these debts are ‘ours’ then the least we can expect is to know what we are paying. But their impact goes much deeper. In the words of Irish activist Andy Storey, an audit can ‘remove the mask of financial power which pulls the strings over our economy and therefore our society’. It is particularly important in a country that has been through dictatorial rule, in unveiling how international lenders propped up the illegitimate regime. But even in European societies, it digs deep into the connections between power and finance, unveiling how and in whose interests an economy works.
Most debt audits have been done on a shoestring budget, using what information can be gleaned from freedom of information and other research. The Brazilian Citizen Debt Audit was the first such initiative in 2001. In 2006, President Correa made Ecuador the first country to hold an official audit, declaring ‘my only debt is to the people’. Despite the presidential backing, the audit was a mammoth task, which encountered constant resistance from civil servants unwilling to disclose the secrets of former regimes.
In 2008, the audit commission reported that debt had done ‘incalculable damage’ to Ecuador’s society. It uncovered numerous illegal, useless and extortionate loans that had bled the country of resources. Correa essentially defaulted on the most dubious of this debt – a set of bonds. Even the Economist called Correa ‘incorruptible’ when public spending rose as a consequence.
Activists, however, wanted him to go much further in repudiating debts. This is one of the problems of state-sponsorship of such mobilisation processes, which has also led to disappointment among activists in Argentina and Brazil as promises have not translated into broader economic transformation. Smaller official audits have been initiated, but not carried through, in Argentina and the Philippines, with more promised in Nepal and Bolivia.
Meanwhile, activists in Zimbabwe are working on an audit to show the role that lending from the IMF and World Bank, as well as Northern governments, played in the creation of crisis in that country. Once Zimbabwe is judged to have transited Mugabe’s regime, the country faces a barrage of new IMF loans with accompanying control of the economy. The debt audit is a first step to challenging this control.
Some look on debt audits as ‘reformist’ – surely the truly radical answer is for a country to simply stop paying its debts? Actually it’s not so simple. A default is not automatically progressive – look at those of Mugabe in Zimbabwe or al-Bashir in Sudan. Repudiation and default might be the best option, politically and economically, but it is not without pain. A country’s population will need to proactively take on the hardships and isolation it is likely to experience. A thorough understanding is an essential prerequisite.
People can’t be led to support a default in the mistaken belief that ‘everything will return to normal’. Things may get worse. As 28-year-old Icelander Thorgerdun Ásgeirsdóttir said after he voted to turn down the British and Dutch terms for repaying his country’s debt, ‘I know this will probably hurt us internationally, but it is worth taking a stance.’
Such an understanding is also necessary if a default is to become a genuine first step towards wider change. Argentina pulled off one of the biggest defaults in history in 2001, after years of following faulty IMF advice. Economically it worked – the economy began recovering quickly. But many activists lament the failure of the Argentinian government to build on this by creating a different form of economic development. In spite of rapid growth, poverty remains at 30 per cent, inequality is high and the majority continue to suffer from a debt-led form of ‘development’.
Audits in Europe
Clearly debt in Europe has many differences from debt in the global South. Little European debt today was run up by dictatorial regimes, and the payment of that debt will not lead to the levels of hardship experienced by truly impoverished countries. But issues of wealth and power redistribution, of who controls our society and who foots the bill for that accumulation of power, are the same everywhere.
What does the Greek audit hope to uncover? Greek academic and activist Costas Lapavitsas has said he is not certain that the bulk of Greek public debt is legal, ‘given especially that it has been contracted in direct contravention of EU treaties which state that public debt must not exceed 60 per cent of GDP’ – something the creditors were fully aware of. Some Greek debt was massaged by Goldman Sachs to hide the true extent of Greece’s liabilities. According to Lapavitsas, the bailout package itself was not contracted in accordance with normal parliamentary oversight.
We in Europe are living in a society in which financial interests have captured our governments, control our economies and eat into every aspect of our lives. They have even captured our very notion of democracy – overruling the fact that true democracy cannot really exist in a society of vastly growing wealth differentials, where bankers pull all the strings. Struggles for political democracy cannot hope to succeed separate from struggles for economic democracy. Debt audits are means of seeing democracy in a more holistic way. Their adoption could help pave the way for a genuine break with the failed economic policies of the past.
