There's a fascinating article in the Guardian, published yesterday, asking if a large part of public debt is illegitimate because it was not incurred to support stated policy aims such as investment, job creation and growth, but to support tax cuts for a limited part of society. That illegitimacy is suggested to arise because those who are now being asked to pay for the consequences of that debt are those who had the least benefit from it being incurred, if they had any at all.
I think that the argument is interesting because this is a perspective I have not previously thought about within the UK economy. I also think that the call for an audit of the national debt and who owns it is interesting. There are issues implicit within those requests that very clearly need answering, whether or not the premise of the illegitimacy of the debt is accepted or not.
I can foresee all the problems of a country like the UK seeking to renege on any part of it debt: I think there may be better ways to achieve this through variations on quantitative easing. But, equally, to raise the question of whether debt has to be repaid in the future simply because it was incurred by past governments is something that has become acceptable within the context of developing countries. To raise the same question in a European context is provocative, but that is what good questions should be. This one seems worthy of debate even if at present I have a distinct feeling that a formal Jubilee for national debt may be inappropriate.
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so much new thinking around richard , a welcome change to try to reclaim what we have lost in the past thirty years .
It’s an interesting perspective- in some Third World countries, it is, in my opinion correctly argued that in the wake of a government being toppled by popular uprising ( or indeed overthrown by a coup)the debts incurred by the previous regime should be invalidated. So, for example, the contemporary Ugandan government shouldn’t be held responsible for the debts incurred by the Amin regime, or the CAR shouldn’t bear the cost of Bokassa, etc. Not sure I’d ever considered applying it outside the Third World, but it’s certainly an idea worthy of discussion. Like you, I can foresee a number of practical issues, but it stimulates a welcome debate on the nature of sovereign debt….
Not for the first time we find some basis for agreeing
I think the argument in developing countries is very much clearer but the added new nuance os fascinating and brings in discussion of control and capture which are missing from too much political debate
I must confess I hadn’t even considered this discussion in an EU context. That would certainly add an interesting dimension to Eurozone discussions! It is also, perhaps a key reason why I don’t think the question will be raised on a European basis – nevertheless, as you point out, many interesting questions are that precisely because they do provoke thought which challenges ‘norms’.
The main problem seems to be that the mechanisms of debt issuance (that is, treasury selling gilts to GEMM’s and then buying them back using more gilt issuance) is skewed to benefit a minority -this needs serious examination.
Or perhaps debt to give scope for tax avoidance to those who profit most by it?
Curses! Error on website entry!
It’s my view that the same principle applies to all the “privatized” NHS contracts handed out by the Tories to their chums and donors, given the Tory Manifesto Pledges about “no more top-down reorganization of the NHS” and “the NHS is safe in our hands” – such promises mean that any “contracts” concluded after an election on such a Manifesto constitute contracts that are void, either for non-performability (since one of the parties to the “contract” lacked the authority, from the electorate, so to act – indeed, possessed only a PROHBITION on entering into such a contract), OR, given the implication of the above, they are void for illegality, on the basis that they were fraudulently contracted by one of the Parties, namely the British Government.
Further extending the argument, that just as the CAR should not be liable for any of the malfeasance of Bokassa, so any incoming Government should not be liable for any such malfeasance of this Government, so that any liability for damages should fall on the Tory Party, which would be sued by its disgruntled chums – who would NOT of course, receive any Legal Aid, since “he who comes into Equity must come with clean hands” – oh, I know this would be a case of non-performability of contract, not equity, but the principle should be imported into ANY actions undertaken by a government, who ONLY ACT/HAVE POWER as our agents!
Legally you are arguing the contracts are ultra vires
It has been proven that the government can act ultra vires – HMRC did in doing a tax deal with Mohammed al Fayed
Interesting idea
Richard – my reply to your response is “Yes AND No”.
Yes, because, as of now, we could only use some variation of ultra vires to attack, and impugn governmental decisions and actions.
No, because I am really thinking of something more thoroughgoing than ultra vires.
For there are time limits on Judicial Review, even if I could surmount the locus standi hurdle – probably could, as a UK citizen and NHS user – and the sturdier defence of legal immunity from suit that attaches to most governmental actions.
Secondly, ultra vires derives from the idea that Ministers and governmental Departments are granted powers, which are therefore intra vires, and the actions of these parties can only be called into question if it can be established that they exceeded their powers.
Now, the problem is that we have the constitutional axiom of the supremacy of the Crown in Parliament, meaning that whatever Parliament declares legal becomes legal. But this is the same jurisprudence that obtained in pre-War Germany, so that Hitler, as lawfully appointed Chancellor, as Leader of the largest Party in the German General Election of November 1932, was able legally, and constitutionally, to bring in the repugnant anti-Jewish legislation, made all the easier as the Nazis won an increased vote in the March 1933 general Election (from 33% to 43%)
I repeat my desire for a Fundamental Law Act, which would declare certain actions to be unconstitutional, even if 100% of the MP’s voted for them, such actions only being permitted by full, and informed, referendum of the electorate. Under this, all Thatcher’s privatizations, especially her odious and malevolent Right to Buy, would have needed proper discussion and exploration, culminating in a Yea or Nay Referendum.
MP’s may make laws and rules and regulations – subject to the above proviso, namely, that they conform to the principles of justice and fairness (that would be set out in any Fundamental Law Act), but I’ll be damned if they have any right to sell off what was built up by the blood and treasure of our forebears without asking explicit approval for doing so.
And they certainly should then do so without resorting to the con-man’s trick of selling to the citizens of the UK, for money’s worth, what already belongs to those citizens as of right: that is no different from the con-men who sell Tower Bridge or the Eiffel Tower to unsuspecting mugs, which is what the neo-liberals have managed to take the majority of UK citizens for, because we have allowed them to do so!
What should have happened in the privatizations is that, in addition to any shares on sale for an IPO, EVERY citizen should have been explicitly granted shares in the privatized organizations, which they might then have sold, had they wished – but ONLY after a period of time – five years, say? – with the State having first refusal. And any “essential” organization (utilities, water, rail and other transport) should have had an unsellable “golden share”, representing 51%, so that the Government could represent all the citizen shareholders, who might indeed, have also decided to come together and support citizen representatives on the Boards of those organizations.
In a word, politics and the economy are too important to be left to politicians and economists!
I agree we need a constitution – which would, I think,achieve much the same aim?
Well put-Andrew- our voting system creates an endless succession of Governments acting without democratically granted power; add onto this a banking system that controls Government then we can begin to see how much democracy is left!
It is worth noting, Richard, that what Andrew suggests approaches aspects of the Quaker Business Method. This would slow decision making down , a good thing in my view so we get more transparency, think about the ramifications of policy (often contradicting manifesto statements!) and create a more engaged populace, though that would be a tall order today with the present state of sleep-walking!(In relation to the latter, there was an interesting conversation with David Graeber on the kaiser Report where he suggests that a debt-drowned populace creates a psychology of stress and reduced empathy-worth watching).
Illegitimacy is also the justification that Steve Keen gives for his form of debt jubilee i.e. that each individual in the UK (or wherever) should receive a sufficient sum from the government that aggregated, would bring private sector debt down to 15% of GDP. The proviso that debts must be paid off, before any spending or saving, satisfactorily clobbers the banks too.