Academic journal article World Review of Political Economy

THE CHANGING GEOGRAPHY OF DEBT AND IMF'S INVOLVEMENT: From Global to European South

Academic journal article World Review of Political Economy

THE CHANGING GEOGRAPHY OF DEBT AND IMF'S INVOLVEMENT: From Global to European South

Article excerpt

1.Introduction

After the outburst of the subprime crisis and the nationalization of the private banking sector losses, states-especially those of the eurozone periphery-turned out to be heavily indebted. The resulting risk reassessment process made the financial markets averse to new credit. Therefore, the Achilles' heel of capitalism is noticed in the long-term uncertainty, in its fragility (Gilpin 2011) and the systemic risk translated into the fundamental contradictions of capital accumulation (Harvey 2010). Rooted in the possibility of capital over-accumulation crisis and preferentially related to credit, this turned out to be its strong trump card establishing a new relationship, the one between creditor and debtor that is ensuring longterm stability in the capitalist strata. The indebted subject or entity is tied in the long term, following a path of guiltiness and discipline, and hard-work providing the framework to transform capitalist crisis into an opportunity for the capital. Debt becomes the original sin and "homo debitor" is being constructed in its tracks and projected toward an endless future, of oneself or of its ancestors (Gulli 2013).

Hitherto, this transformation takes place into a complex globalized financial system, where different actors show different notions and strategies concerning debt and credit. Thus, we compare the reasoning of the International Monetary Fund (IMF) in juxtaposition to the one of the Economic and Monetary Union (EMU), taking into account their different notions concerning the lender of the last resort, and their different terminologies concerning debt accumulation. To this end, we draw an analytical sketch of the IMF's recent history and policies. It is common ground that the analytical framework underlying the IMF's position depends heavily on the academic milieu, especially in the US, even if the changes in its positions do not constitute a "paradigm shift." In any case, IMF was never in the core of the dominance of a school of economic thought (Edwards 2003). In the meantime, with the neoliberal character of policy presuppositions, the Structural Adjustment Plans, containing deflationary stabilization packages, market liberalization and structural reforms, were the imperative condition for the "rescued" countries to receive multilateral loans.

Greece-with its specific idiosyncrasies (see also Michaelides, Papageorgiou, and Vouldis 2013)-provides an eloquent case in order to examine power relations regarding debt handling. Joining European Economic and Monetary Union (EMU) fell in specific ideological, political and economic conditions. The foundation of the EMU brought up a field for unleashing the coercive laws of competition as a disciplinary force over the powers of labor and over the previously autonomous powers of the nation state with respect to fiscal and social policies (Harvey 2010). Private lending took advantage of the low interest rates, engaging to procyclical heavy borrowing that was mainly expressed through a great increase in consumption, imports and asset bubbles, or through privatizations. Each time welfare state policies capitulated to the market sphere, serving the tight fiscal mandate in the context of the EMU, constituting de facto a shrinkage in (labor class) real wages, benefiting rentiers and other social strata related to imports and construction (Arestis and Sawyer 2013).

Furthermore, the EMU had practically deprived its member states from the ability to apply a national fiscal policy, whereas structural reforms having already taken place in the European Union (EU) had a dramatic impact in the productive capacity of the peripheral economies. It was in this context that the so-called "Grexit" performed a "non-solution" both in economic and ideological terms, i.e., something that cannot be conceived, known, understood, named or been transmitted by means of the langue. On the other hand, the politics of national currency have been mediated through the discourse of national sovereignty and productive reconstruction, boosting of agricultural production and manufacturing sector, aid of exports, and increase in the long-term prosperity of the population, having incorporated a rational, steady approach regarding the dynamics of the currency and its effect on productive transformation. …

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