Tuesday, 4 May 2021

Have Lib Dems accidentally stumbled onto a good idea?


One party which has so far failed to send any election literature to this household is the Lib Dems (but don’t bother to rush out and do it now, we’ve already voted). It’s a pity, because there is one aspect of their policy for this election which strikes me as really interesting and different, namely their promise of debt cancellation. The suggestion that this would be a funded by a ‘specific and limited pot of funding’ detracts from the proposal, with its implicit assumption that it is the funding which determines how much debt is written off rather than the need, and there is a question in my mind as to whether the Senedd actually has the power or resources to do this, but the idea deserves to be more widely debated and explored.

The Tories continually tell us that we are facing a debt crisis as a result of the pandemic. They’re right, but they’re referring to the wrong debt crisis, because they’re referring to government debt. Government debt really is not a problem, but their ‘solution’ to this non-problem, namely austerity (although Johnson will insist on calling it something different given his oft-stated aversion to austerity) will not only not solve the non-problem, but will worsen the real debt crisis, which is the extent of private debt burdening lower paid families. Apart from austerity, the second part of the government’s post Covid recovery strategy assumes that, as a result of lockdown, people have been spending less and that spending will be released in a splurge when people can start going to restaurants and hotels and taking holidays again. From the perspective of the social circles in which the Tories move, that may well look to be realistic, but for many families, reduced income as a result of furlough, and the fear of job insecurity as furlough ends and some companies find themselves no longer viable means that many have fallen further into debt, and even amongst those who have seen an opportunity to reduce their debts – or even save – it doesn’t follow that they will be ready to risk their financial security immediately.

Debt cancellation is not a particularly new idea; it’s been done in various economies in the past, sometimes in the form of a general amnesty, other times in the form of write-off of specific types or elements of debt. Amongst the earliest examples was the ancient civilisation of Mesopotamia, which went through a series of cyclical cancellations of debt, aimed at freeing debt slaves and maintaining social peace and stability. Whilst people are not, these days, forced into slavery as a result of debt, they often find themselves forced into taking multiple jobs, depending on friends and family, or sinking deeper into debt. And the driver of debt cancellation for King Hammurabi – social peace and stability – is as valid and relevant today as it was 3000 years ago.

The idea goes against current economic orthodoxy, of course, to say nothing of the idea that the poor deserve to be poor and that people who get into unmanageable levels of debt deserve their fate. But these are shibboleths of capitalist ideology which need to be challenged, and selfishness needs to be replaced by a greater sense of social solidarity. The Lib Dems, albeit in a typically timid and limited Lib Dem fashion, are actually onto something important and radical here (although any of them reading this might now start to have second thoughts). It’s a proposal which deserves to be more widely considered, and taken up by others who are more likely to be in a position to do something about it than a fringe party struggling to retain a foothold in the Senedd.


dafis said...

Maybe the Lib Dems are constrained by an unwillingness to wipe out an unlimited amount of debt. In any case wiping out debt alone is unlikely to achieve much as people on unmanagable low levels of income will go back into debt p.d.q unless they opt out of clothing their kids, eating, keeping a roof over their heads, keeping warm,etc etc.

This is likely to be an eternal problem if modern consumerist society continues as it is now. Those who can't afford it still aspire to obtain the latest TV, latest tech/phone, fashion clothing. Tech based marketing stimulates demand for these things which are often funded by - debt !

In tandem with any kind of debt write off there needs to be a move towards UBI or something similar. But, that alone will not underwrite the staggering levels of "must have" purchases that happen daily. So who will educate the masses to shun the craving for the goodies which are often a massive disappointment after they are acquired ? That has to be part of the problem and hence the solution. Eliminate the pressures of instant gratification.

I am left to conclude that LibDems have found an attractive soundbite and are using it knowing they aren't likely to be in a place on Friday where they will need to make it work.

John Dixon said...


I agree with most of what you say here, particularly the point that a one-off debt cancellation can never be more than a temporary solution to the underlying inequality which results from a consumerist society in which many are working at below what might be considered to be a reasonable living wage. But we should not underestimate the impact even a temporary alleviation of debt could have for many; at the least it buys time to develop and implement other policies, incuding UBI.

"I am left to conclude that LibDems have found an attractive soundbite and are using it knowing they aren't likely to be in a place on Friday where they will need to make it work." You may well be right; I found it hard to believe that they had suddenly recongised the extent of the debt problem for the poorest caused by late stage capitalism. But, hey, if a policy does no more than provide a temporary relief for those hardest hit by the economic system, it's still worth considering. And, as Hammurabi found, it can always be repeated...

dafis said...

I guess old Hammurabi was the first guy to use a kind of quantitative easing,one off credit to remove debt, although much more radical in that it benefitted the less well off rather than inflating the assets of those already rich. Who was his Chancellor ?