We have not acquired any debt. The so-called public debt really belongs to the oligarchy. We the peoples have not acquired anything or been benefited, and thus we owe nothing.

–Confederation of Ecuadorian Kichwas (ECUARUNARI), quoted in Daniel Denvir, AlterNet (2008-12-15): Ecuador Calls foreign Debt Illegal, Defaults on Payments

Last month, the government of Ecuador defaulted on a US$ 30,600,000 interest payment on US$ 510,000,000 in bond debt. They will be defaulting on payments on two other series of bonds, amounting to US$ 9,937,000,000, or 19% of the entire country’s GDP.

Kevin Carson, in his first (hooray; congratulations) regular weekly commentary at the Center for a Stateless Society, says It’s about time, and Good on them. He points out that this massive government debt has nothing to do with freed trade or voluntary production. It has everything to do with building political alliances between governments and providing government funding for massive forced-modernization boondoggles and corporate privateering — with the costs, as always, taken out of the hides of Ecuadorian workers and farmers. As Carson writes:

That's entirely correct. In the specific case of Ecuador, according to John Perkins (Confessions of an Economic Hit Man), the loans were designed to foment conditions that make [Ecuador] subservient to the corporatocracy running our biggest corporations, our government, and our banks. Infratructure loans were granted on the condition that engineering and construction companies from our own country must build all these projects. In essence, most of the money never leaves the United States; it is simply transferred from banking offices in Washington to engineering offices in New York, Houston, or San Francisco.

. . .

[The main function of the government agencies set up to receive and manage foreign debt] is to work in collusion with the World Bank to run up debt building the infrastructure foreign capital needs for profitable investment. A majority of World Bank loans since that agency's inception have gone to building the roads and utilities necessary to support foreign-owned industry. The effect is to crowd out decentralized, small-scale, locally-owned industry serving local markets, and to integrate the domestic economy into a neoliberal framework of providing raw materials and labor for foreign industry.

The resulting debt (which the people of the country never approved) can then be used to further cement neoliberal policies, by blackmailing the local government into adopting a structural adjustment program. And the policies adopted under such programs generally include the privatization of the same infrastructure the loans were taken out to build, and selling it to the very people it was built to serve. Not only that, but the privatization is generally arranged on terms virtually dictated by the purchasers, with native governments sometimes spending more taxpayer money to make the assets salable than the sale actually fetches.

— Kevin Carson, Center for a Stateless Society (2009-01-05): Ecuador Repudiates Foreign Debt: It's About Time

Kevin has an excellent discussion of the structural and economic effects of massive government debts in formerly colonized countries like Ecuador. I think he’s entirely right. Of course, I couldn’t care less about the fact that the government of Ecuador has trouble raising funds for its own domestic parasitism and government-funded, government-regimented programs. Like all government programs, these range from useless to foolish and destructive. Would that the government of Ecuador couldn’t raise any money for any purpose. But what is a problem is the fact that the money for the payments on those debts — like all government payments — is always taken out of the pockets of the Ecuadorian people, through taxation, which is to say, by force.

And it’s that that I want to say something about today — not only the structural effects of government debt and government-lubricated neoliberalism (which is to say, government-financed state capitalism), but also the moral case for unilateral and unconditional repudiation. That case is a simple case, and it’s exactly what ECUARUNARI said: people should never be forced to pay debts that they never agreed to take on.

So-called public debt is, of course, never contracted by the public (if that means all the people of a particular country) it is contracted by a tiny, parasitic minority that lives at the expense of the rest of the public, and which has arbitrarily declared itself the rightful rulers and the designated collective-bargaining agents of everybody else in the country — whether or not anybody else ever agreed to that arrangement. When banks or foreign governments loan money to a government, they loan it to that tiny, parasitic minority, and they do so with the expectation that their investment will be repaid by means of taxation, which is to say, by means of the money that the government extracts from the public by force. None of the rest of us are ever asked to take on these debts; none of us are ever given any meaningful choice over whether to take on these debts, or how to disburse the money that has been loaned to us; we are just made to pay them against our will. (And it will not help to say that we somehow consented to let the government act as our financial agent, and so consented to cover the costs of the decisions they make on our behalf; nobody ever consents to the State.)

Now, those individual people — members of the tiny, parasitic minority — who did contract the debt may try to pay it — out of their own pockets — if they like. That’s their business. If they think it’s worthwhile to do so, they can even pass the plate and ask people to voluntarily help pay it back. That’s between them and their donors. But neither they, nor any governments which may show up later to assume the old regime’s usurping claims, have the least duty, or the least right, to inflict their debts on any other living person, or to send the bill to the government tax apparatus (which just means forcing taxpayers to pay for it). But then there are no legitimate government debts at all; at the very most, there are private debts that the tiny, parasitic minority have taken on themselves and then ransomed from the rest of us by force.

Whatever the would-be governmors of Ecuador may owe, the people of Ecuador owe not one damned dime to the World Bank, the IMF, CitiBank, or any other lender. And so the real issue is justice, not charity — except insofar as the most charitable thing that rich governments can do for poor people is to get their boots off, and their fangs out, of those people’s necks. All of which means that the political focus needs to be on inciting indignation and resistance from the people being forced to pay these criminal debts — not on appealing to the better natures of the people collecting them. And that the only just policy with regard to government debt is to burn the bills and stop taking the collectors’ calls — to repudiate all government debts unilaterally, immediately, completely, everywhere, and forever. Whether or not you have taken the time to get permission from the IMF, the United States government, or the humanitarian rock stars of the world.

It may be claimed that, even if repaying the loans by means of taxation is an injustice against Ecuadorian taxpayers, policy-makers (the dignified term that some people use for ranting, violent power-trippers in government offices) must balance that against the injustice of defaulting on the loans — which would be an injustice against investors who made those loans in good faith, expecting to be repaid. But no, it wouldn’t. They made the loans expecting that their return would be stolen from out of the pockets of the Ecuadorian people. (This is why government bonds are traditionally rated as safe investments; the safety consists in the fact that the interest payments are extracted by force rather than depending on market success.) There is no such thing as a good-faith loan to a piratical enterprise; if those who made the loans get nothing for their trouble, then they’ve earned, and deserve, exactly what they get.

It may also be objected that, whatever the justice of the case, insisting on the right to repudiate government-contracted debts will be harmful for the Ecuadorian people — more harmful than the alternative of paying off those illegitimate debts — and so that it would be a good idea to pay them off anyway, as a sort of a ransom. But these objections always depend on one of two lines of argument, both of which are fallacious. First, there are those who argue that repudiating government debts will make Ecuador a pariah, and cut them off from trade, credit, and other resources for economic growth. Thus, for example, Enrique Alvarez, head of research for Latin America Financial Markets for IDEAglobal in New York: They were already sort of headed into isolation. Essentially now they’ve drawn shut the gate. But this line of argument only makes sense if you talk about Ecuador and completely forget the difference between the Ecuadorian government and the Ecuadorian people. Repudiation of government debts will surely make it more difficult for the government to find credit or make financial deals in the future. But so what? If we’re interested in the well-being of the people in Ecuador, and if development means prosperity for ordinary people, rather than a government-driven fetish for great big centrally planned projects, then the important issue has nothing to do with whether or not the government can find credit. It has to do with whether or not people can find trading partners, investors, and money for their own projects. There’s no reason why repudiating government debts would make people in other countries less interested in trading with or extending credit to individual people or private outfits in Ecuador, and so no reason why anyone other than the Ecuadorian government would end up in isolation. And if the Ecuadorian government ends up in isolation, well, who cares, as long as the Ecuadorian people remain free to do their own work and make their own deals?

Others, having recognized that repudiation only immediately harms the financial prospects of the government, not ordinary Ecuadorians, will go on to object that it will still harm the Ecuadorian people, anyway, because that will make it harder for the Ecuadorian government to raise money for its own projects in the future. But while that’s true enough, it’s a plain non sequitur to infer from it that the Ecuadorian people will be harmed by that fact — unless you help yourself to the auxiliary premise that the Ecuadorian people somehow benefit when the Ecuadorian government has easy access to money for its projects. That in turn makes sense only if you suppose that the Ecuadorian government’s projects tend to benefit the Ecuadorian people. But while lots of people make that claim, either tacitly or explicitly, hardly anyone makes any real effort to defend it. And in fact, given both what we know about governments in general, and in particular about the kind of governments that tend to rule countries like Ecuador, it’s a claim that happens to be ridiculously implausible. As a matter of fact, permanently crippling governments’ ability to raise funds for costly government projects is one of the best developments I could hope for on the world scene.

When Progressive outfits like Make Poverty History have noticed the problems that government debts create, their response has been, mainly, to beg rich governments to cancel the existing debts of poor governments, as a sort of charitable hand-out to the poor dears, preferably through a process mediated by some international bureaucracy, probably under the control of the U.N. The whole proposal is absurd; the main consolation is that, like most other grand Progressive proposals, it is more or less completely ineffectual. (Who do you think has more influence over the U.S. government’s trade and international finance bureaucracies? Bono or the IMF and CitiGroup?)

In fact, discussions of government debt should not focus on mediated settlements or relief from creditor governments, but rather on unilateral repudiation of so-called public debt by debtor governments. Not because enforcing the collection of these debts is scroogish or because it ought to be tempered by considerations of charity, but rather because the debts themselves are completely illegitimate and enforcing the collection of these debts is absolutely unjust. Whether that’s the debts of the governments in Ecuador, or in Tanzania, or, for that matter, in the United States of America — where we are all being extorted to pay off US$ 10,000,000,000,000 of debts that we never once agreed to. Debts that were taken out without our permission, then inflicted on us against our will, so that this government could pay for its murderous wars, its tyrannical surveillance and intelligence apparatus, its brain-dead federal programs, its byzantine busybodying regulation, and its multitrillion dollar preservation programs for endangered capitalists and their habitats in the economic status quo.

So here’s to repudiation; and here’s hoping for two, three, many Ecuadors….

Finance capital — possibly the single most heavily regulated market in the entire global economy, which is shaped by the dictates of literally hundreds of government central banks around the world, which is constantly carried on with a background promise of bail-outs by government agencies like the IMF, the U.S. Federal Reserve, the U.S. Department of the Treasury, the European Central Bank, etc., and which is overseen by so many different regulatory agencies that they often can’t even decide which is supposed to be regulating a particular subset of the market — is empirical proof that Financial markets have been given their freedom, and they have disgraced themselves. As my Scottish headmaster used to say [sic!], back in the 1950s, privileges that are abused will be withdrawn. The time has come to put markets back under strict controls and restrictions, such as those under which they laboured from the 1930s till the 1970s.

Also, little did I know how much cause I had to rejoice: I never realized it, but it turns out that the libertarian movement [conquered] the world at some point within the last 40 years. It’s true: I read it on the Internet.

See also:

• GT 2008-01-04: Cognitive Dissonance of the Non-Libertarian Left
• GT 2008-05-03: Am Denver Burning?
• GT 2007-11-08: Sprachkritik: Privatization
• GT 2007-10-25: Radical healthcare reform

Left libertarians, like all libertarians, believe that all State control of industry and all State ownership of natural resources should be abolished. In that sense, libertarian Leftists advocate complete and absolute privatization of, well, everything. Governments, or quasi-governmental public monopolies, have no business building or running roads, bridges, railroads, airports, parks, housing, libraries, post offices, television stations, electric lines, power plants, water works, oil rigs, gas pipelines, or anything else of the sort. (Those of us who are anarchists add that governments have no business building or running fire departments, police stations, courts, armies, or anything else of the sort, because governments — which are necessarily coercive and necessarily elitist — have no business existing or doing anything at all.)

It’s hard enough to sell this idea to our fellow Leftists, just on the merits. State Leftists have a long-standing and healthy skepticism towards the more utopian claims that are sometimes made about how businesses might act on the free market; meanwhile, they have a long-standing and very unhealthy naïveté towards the utopian claims that are often made on behalf of government bureaucracies under an electoral form of government. But setting the substantive issues aside, there’s another major roadblock for us to confront, just from the use of language.

There is something called privatization which has been a hot topic in Leftist circles for the past 15-20 years. It has been a big deal in Eastern Europe, in third world countries under the influence of the IMF, and in some cases in the United States, too. Naomi Klein has a new book on the topic, which has attracted some notice. Klein’s book focuses on the role that natural and artificial crises play in establishing the conditions for what she calls privatization. But privatization, as understood by the IMF, the neoliberal governments, and the robber baron corporations, is a very different beast from privatization as understood by free market radicals. What consistent libertarians advocate is the devolution of all wealth to the people who created it, and the reconstruction of all industry on the principle of free association and voluntary mutual exchange. But the IMF and Naomi Klein both seem to agree on the idea that privatization includes reforms like the following:

• Tax-funded government contracts to corporations like Blackwater or DynCorp for private mercenaries to fight government wars. This has become increasingly popular as a way for the U.S. to wage small and large wars over the past 15 years; I think it was largely pioneered through the U.S. government’s efforts to suppress international free trade in unauthorized drugs, and is currently heavily used by the U.S. in Colombia, the Balkans, and Iraq.

• Tax-funded government contracts to corporations like Wackenhut for government-funded but privately managed prisons, police forces, firefighters, etc. This has also become increasingly popular in the U.S. over the past 15 years; in the case of prisons, at least, it was largely inspired by the increasing number of people imprisoned by the U.S. government for using unauthorized drugs or selling them to willing customers.

• Government auctions or sweetheart contracts in which nationalized monopoly firms — oil companies, water works, power companies, and the like — are sold off to corporations, with the profits going into the State treasury, and usually with some form of legally-enforced monopoly left intact after privatization. One of the most notorious cases is the cannibalistic bonanza that Boris Yeltsin and a select class of politically-connected Oligarchs helped themselves to after the implosion of Soviet Communism. Throughout the third world, similar auction or contract schemes are suggested or demanded as a condition for the national government to receive a line of tax-funded credit from the member states of the International Monetary Fund.

• Yet Another Damn Account schemes for converting government pension systems from a welfare model to a forced savings model, in which workers are forced to put part of their paycheck into a special, government-created retirement account, where it can be invested according to government-crafted formulas in one of a limited number of government-approved investment vehicles offered by a tightly regulated cartel of government-approved uncompetitive investment brokers. This kind of government retirement plan is supposedly the centerpiece of privatization in Pinochet’s Chile, and has repeatedly been advocated by George W. Bush and other Republican politicians in the United States.

Klein and other state Leftists very claim that these government privatization schemes are closely associated with Right-wing authoritarian repression, up to and including secret police, death squads, and beating, torturing, or disappearing innocent people for exercising their rights of free speech or free association in labor unions or dissident groups.

And they are right. Those police state tactics aren’t compatible with any kind of free market, but then, neither are any of the government auctions, government contracting, government loans, and government regulatory schemes that Klein and her comrades present as examples of privatization. They are examples of government-backed corporate kleptocracy. The problem is that the oligarchs, the robber barons, and their hirelings dishonestly present these schemes — one and all of them involving massive government intervention and government plunder from ordinary working people — as if they were free market reforms. And Klein and her comrades usually believe them; the worst sorts of robber baron state capitalism are routinely presented as if they were arguments against the free market, even though pervasive government monopoly, government regulation, government confiscation, government contracting, and government finance have nothing even remotely to do with free markets.

I’d like to suggest that this confusion needs to be exposed, and combated. In order to combat it, we may very well need to mint some new language. As far as I know, privatization was coined by analogy with nationalization; if nationalization was the seizure of industry or resources by government, then privatization was the reversal of that process, devolving the industry or the resources into private hands. It is clear that the kind of government outsourcing and kleptocratic monopolies that Klein et al condemn don’t match up very well with the term. On the other hand, the term has been abused and perverted so long that it may not be very useful to us anymore, either.

So here’s my proposal for linguistic reform. What we advocate is the devolution of state-confiscated wealth and state-confiscated industries back to civil society. In some cases, that might mean transferring an industry or a resource to private proprietorship (if, for example, you can find the person or the people from whom a nationalized factory was originally seized, the just thing to do would be to turn the factory back over to them). But in most cases, it could just as easily mean any number of other ways to devolve property back to the people:

1. Some resources should be ceded to the joint ownership of those who habitually use them. For example, who should own your neighborhood streets? Answer: you and your neighbors should own the streets that you live on. For the government to seize your tax money and your land and use it to build neighborhood roads, and then to sell them out from under you to some unrelated third party who doesn’t live on them, doesn’t habitually use them, etc., would be theft.

2. Government industries and lands where an original private owner cannot be found could, and probably should, be devolved to the co-operative ownership of the people who work in them or on them. The factories to the workers; the soil to those who till it.

3. Some universally-used utilities (water works, regional power companies, perhaps highways) which were created by tax money might be ceded to the joint ownership of all the citizens of the area they serve. (This is somewhat similar to the Czechoslovakian model of privatization, in which government industries were converted into joint-stock companies, and every citizen was given so many shares.)

4. Some resources (many parks, perhaps) might be ceded to the unorganized public — that is, they would become public property in Roderick’s sense, rather than in the sense of government control.

Now, given the diversity of cases, and all of the different ways in which government might justly devolve property from State control to civil society, privatization is really too limiting a term. So instead let’s call what we want the socialization of the means of production.

As for the IMF / Blackwater model of privatization, again, the word doesn’t fit the situation very well, and we need something new in order to help mark the distinction. Whereas what we want could rightly be called socialization, I think that the government outsourcing, government-backed monopoly capitalism, and government goon squads, might more accurately be described as privateering.

I’m just sayin’.

Further reading:

• GT 2004-06-07: Property to the People: the Leftist case for privatization
• GT 2007-10-25: Radical health care reform

For those who may be interested, here’s a bit more about my troubles with the public utilities, and a reply to my friend Sergio Méndez’s comments.

A new router was ordered and arrived some days ago (you may have guessed as much from the increased volume of posts), and thanks to Microsoft Corporation decision to exit the wireless market, I managed to get a faster, more secure, and much more reliable wireless LAN (802.11g secured with WPA, nosy) in my house for fire-sale prices.

The water is back on, for the time being at least, and the power surges have–as far as I can tell–stopped. On the other hand, they didn’t stop before they had also fried my cable modem–meaning that for a while I was not only without a router, but not even able to plug my laptop in directly for Internet access for even a limited part of the day. Thanks, tax-supported utilities!

We’re renting the equipment from Comcast, so I took it into their payment center; they swapped it out for a new one with no questions asked and at no charge.

Meanwhile, the road outside of my house is still torn up, a month and a half after they ripped the pavement up.

I say this by way of an entre into replying to Sergio’s comments on my post. He quite rightly prods me about what is said and what is left unsaid in my post:

Charles, with all due respect…Do you actually think it will have been different if the public roads and electricity company was privately owned?

Short answer: yes. Longer answer: it would be a little bit different no matter what, but a lot depends on what is being envisioned as the form of private ownership.

I think that what Sergio has in mind here is something like the wave of IMF-driven privatization schemes for government utilities in Latin American and sub-Saharan Africa, and the Republicans’ idea of a programme for privatization in America (those Republicans, at least, who still harbor faint dreams of being something other than shameless lackeys for the Bush Administration’s economic royalism). I can sympathize with having a lot of misgivings over the idea of privatization if that’s the only kind that’s on offer; and in the present political environment (where brazen Mussolinism passes for free marketeering) it may very well be the only kind that’s likely to happen in the near future. But it’s worth remembering that privatization just means the transfer of businesses and resources from government control to control by individual citizens or groups of them–which does not necessarily mean selling them off in sweetheart deals to large corporations. It could mean something quite different, and something very much more humane and empowering.

I’ll have more to say about that in a moment. But first I want to note an important aspect in which even traditional corporate-driven privatization of utilities would have made a difference to the sort of crap that government providers put us through. One of the arguments that people give all the time when they are arguing for nationalizing utility services is that utilities need to be provided by projects that are accountable to the people, and not to the bottom line; thus, they should be entrusted to the elected government in a liberal democratic polity, and not left to the hard-bitten world of corporate commerce. But this neglects an extremely important point: the degree to which being accountable to the bottom line makes them accountable to the public–at least if the public here is taken to mean you, the individual person having to deal with them, and not some Rousseauian mystification of the the general will. (Since I entirely lack a general will, I’ll leave any questions concerning it to other, more enlightened commentators.)

Don’t get me wrong: corporations can be huge assholes. In this vale of tears, there are people who are foolish, short-sighted, irresponsible, avaricious, or cruel, and no small number of them seem to be in the world of business. I realize all this, and I want a radically different world; the red in my flag means socialism. But the black in my flag means anarchism, and I don’t see any reason to think that people in government bureaucracies would be somehow more angelic than those in corporate bureaucracies, so I think the important question to ask is one of incentives. And if you look at the incentives, the facts are that you, personally, can make a difference on the margin when you are dealing with a private company, whereas you can’t with the government. Think of it this way: who is going to be more accountable to you and more ready to help you with your problems–someone who could lose $60/month right now if you’re unsatisfied, or who has the power to take your money for the service whether you like it or not, who was appointed by some other person, who in turn might lose your one vote amongst the thousands or millions that determine whether or not they will keep their job–if you’re so pissed off that one or two or four years from now the crappy service from your public utilities happens to be the deciding factor for your vote? (And who, by the way, will suffer no marginal loss whatsoever of power or responsibility or income for having lost one vote that they had before….)

Let alone if you happen to live in a Black neighborhood (or a working-class white neighborhood), or if you are a woman, or a member of any number of other groups who are drastically underrepresented in the government and who are often dismissed or marginalized in the political process.

Of course, you might object that these are all reasons for democratic political reform: if it’s so hard for individual citizens (especially those without established political connections) to make any difference to how government-run utilities do business, then why not make politicians more accountable to the citizens, by instituting reforms like public comment periods, shorter election cycles, term limits, citizen recalls, voter initiatives, and so on? Well, fine–and I think these would all be laudable reforms. But if you get to change around the constitution of the government for hypothetical purposes, then I should certainly be able to put forward ideas based on a radically environment in terms of the coordination of businesses, private ownership, and privatization of government resources. If we’re talking about instituting fundamental reforms, then why not also talk about what privatization would be like with fundamental reforms to how services are privatized and who gets chances to buy up the resources?

Imagine what it would be like if privatization meant that you and your neighbors (organized into a neighborhood co-operative) owned the street in front of your house? If privatized parks meant selling land to the Trust for Public Land rather than corporate developers, or simply donating park land as public property (instead of government property: for the difference, see Roderick Long‘s essay, In Defense of Public Space)? If privatized water meant that the local government would sell different parts and aspects its water works to a half-dozen local groups, including worker-owned union shops and not-for-profit co-operatives? If privatized electricity meant no more subsidies for huge, centralized fossil fuel plants and selling power wires to local neighborhood associations that work towards putting up small-scale solar energy production from panels on their roofs? That you and your neighbors were the ones who made the decisions about when your road needs to be fixed and who should be hired to fix it? That you can switch power companies if their service causes power surges and they refuse to compensate you for equipment destroyed, or switch water companies if they start turning the water off without warning for hours at a time? If it meant that utilities would be in the control of a vast, bottom-up network of individual people, voluntary associations, and local co-operatives making the decisions about what they want and need?

I can tell you one thing for sure: nobody on Olive St. would be paying for a bunch of assholes who leave our road torn up for a month and a half while they go work on other stuff.

If you want the services that matter to your life to be provided cheaply and reliably, with high quality and under your own control rather than the control of unaccountable bureaucrats, then the answer to Behemoth corporations is not a Leviathan state! The answer is a society based on local autonomy, co-operative production, and mutual aid–that’s cooperative, not coerced, and mutual aid, not the crumbs of tax monies that the sovereign deigns to drop from the table. Freedom makes your life better. And if it is done in a spirit of giving the people back their own, rather than in the spirit of cutting sweetheart deals with big corporate contributors, then it will especially make life better for people who have historically been oppressed and disenfranchised. That’s not actually the primary reason you should support it (your primary reason should be that other people are not your property). But some things are valued both for themselves and for their consequences; and as consequences go, this is as good a reason as any.