The Democracy Project

by David Graeber

  So how does it work?

  The system is endlessly complicated. It has also changed over time. For most of the Cold War, for instance, the effect (aside from getting U.S. allies to largely underwrite the Pentagon) was to keep cheap raw materials flowing into the United States to maintain America’s manufacturing base. But as economist Giovanni Arrighi, following the great French historian Fernand Braudel, has pointed out, that’s how empires have tended to work for the last five hundred years or so: they start as industrial powers, but gradually shift to “financial” powers, with the economic vitality in the banking sector.13 What this means in practice is that the empires come to be based more and more on sheer extortion—that is, unless one really wishes to believe (as so many mainstream economists seem to want us to) that the nations of the world are sending the United States their wealth, as they did to Great Britain in the 1890s, because they are dazzled by its ingenious financial instruments. Really, the United States manages to keep cheap consumer goods flowing into the country, despite the decline of its export sector, by dint of what economists like to call “seigniorage”—which is economic jargon for “the economic advantage that accrues from being the one who gets to decide what money is.”

  There is a reason, I think, why most economists like to ensure such matters are shrouded in jargon that most people don’t understand. The real workings of the system are almost the exact opposite of the way they are normally presented to the public. Most public discourse on the deficit treats money as if it were some kind of preexisting, finite substance: like, say, petroleum. It’s assumed there’s only so much of it, and that government must acquire it either through taxes or by borrowing it from someone else. In reality the government—through the medium of the Federal Reserve—creates money by borrowing it. Far from being a drag on the U.S. economy, the U.S. deficit—which largely consists of U.S. war debt—is actually what drives the system. This is why (aside from one brief and ultimately disastrous period of a few years under Andrew Jackson in the 1820s) there has always been a U.S. debt. The American dollar is essentially circulating government debt. Or to be even more specific, war debt. This again has always been true of central banking systems at least back to the foundation of the Bank of England in 1694. The original U.S. national debt was the Revolutionary War debt, and there were great debates at first over whether to monetize it, that is, to eliminate the debt by increasing the money supply. My conclusion that U.S. deficits are almost exclusively due to military spending is derived from a calculation of real military spending as roughly half of federal spending (one has to include not only Pentagon spending but the cost of wars, the nuclear arsenal, military benefits, intelligence, and that portion of debt servicing that is derived from military borrowing), which is, of course, contestable.l

  The Bretton Woods decision was, essentially, to internationalize this system: to make U.S. Treasury bonds (again, basically U.S. war debt) the basis of the international financial system. During the Cold War, U.S. military protectorates like West Germany would buy up enormous numbers of such T-bonds and hold them at a loss so as to effectively fund the U.S. bases that sat on German soil (the economist Michael Hudson notes that, for instance, in the late 1960s, the United States actually threatened to pull its forces out of West Germany if its central bank tried to cash in its Treasury bonds for gold14); similar arrangements seem to exist with Japan, South Korea, and the Gulf States today. In such cases we are talking about something very much like an imperial tribute system—it’s just that, since the United States prefers not to be referred to as an “empire,” its tribute arrangements are dressed up as “debt.” Just outside the boundaries of U.S. military control, the arrangements are more subtle: for instance, in the relationship between the United States and China, where China’s massive purchase of T-bonds since the 1990s seems to be part of a tacit agreement whereby China floods the United States with vast quantities of underpriced consumer goods, on a tab they’re aware the United States will never repay, while the United States, for its part, agrees to turn a blind eye to China systematically ignoring intellectual property law.

  Obviously the relationship between China and the United States is more complex and, as I’ve argued in other work, probably draws on a very ancient Chinese political tradition of flooding dangerously militaristic foreigners with wealth as a way of creating dependency. But I suspect the simplest explanation of why China is willing to accept existing arrangements is just that its leadership were trained as Marxists, that is, as historical materialists who prioritize the realities of material infrastructure over superstructure. For them, the niceties of financial instruments are clearly superstructure. That is, they observe that, whatever else might be happening, they are acquiring more and more highways, high-speed train systems, and high-tech factories, and the United States is acquiring less and less of them, or even losing the ones they already have. It’s hard to deny that the Chinese may be onto something.

  I should emphasize it’s not as if the United States no longer has a manufacturing base: it remains preeminent in agricultural machinery, medical and information technology, and above all, the production of high-tech weapons. What I am pointing out, rather, is that this manufacturing sector is no longer generating much in the way of profits; rather, the wealth and power of the 1 percent has come to rely increasingly on a financial system that is ultimately dependent on U.S. military might abroad, just as at home it’s ultimately dependent on the power of the courts (and hence, by extension, of repossession agencies, sheriffs, and the police). Within Occupy, we have begun to refer to it simply as “mafia capitalism”: with its emphasis on casino gambling (in which the games are fixed), loan-sharking, extortion, and systematic corruption of the political class.

  Is this system viable over the long term? Surely not. No empire lasts forever, and the U.S. empire has lately been—as even its own apologists have come to admit of late—coming under considerable strain.

  One telling sign is the end of the “Third World debt crisis.” For about a quarter century, the United States and its European allies, acting through international agencies such as the IMF, took advantage of endless financial crises among the poorer countries of Asia, Africa, and Latin America to impose a market fundamentalist orthodoxy—which invariably meant slashing social services, reallocating most wealth to 1 percent of the population, and opening the economy to the “financial services” industry. These days are over. The Third World fought back: a global popular uprising (dubbed by the media the “anti-globalization movement”) made such an issue out of such policies that by 2002 or 2003, the IMF had been effectively kicked out of East Asia and Latin America, and by 2005 was itself on the brink of bankruptcy. The financial crisis of 2007 and 2008, which struck as U.S. military forces remained embarrassingly quagmired in Iraq and Afghanistan, has led, for the first time, to a serious international discussion of whether the dollar should remain the international reserve currency. At the same time, the formula the major powers once applied to the Third World—declare a financial crisis, appoint a supposedly neutral board of economists to slash social services, reallocate even more wealth to the richest 1 percent, and open the economy to even more pillaging by the financial services industry—is now being applied at home, from Ireland and Greece to Wisconsin and Baltimore. The response to the crisis coming home, in turn, has been a wave of democratic insurrections, beginning in U.S. client states in the Middle East, and rapidly spreading north across the Mediterranean and on to North America.

  The remarkable thing is that the closer the insurrectionary wave spread to the center of power, to the “heart of the world’s financial empire” as our Chinese friends put it, the more radical the claims became. The Arab revolts included every sort of people, from Marxist trade unionists to conservative theologians, but at their core was a classically liberal demand for a secular, constitutional republic that allowed for free elections and respected human rights. The occupiers in Greece, Spain, Israel were more often than not studi
ously anti-ideological—though some were more radical than others (anarchists played a particularly central role in Athens, for example). They insisted that they were focusing on very specific issues of corruption and government accountability, and thus appealed to perspectives across the political spectrum. It was in the United States that we saw a movement kicked off by revolutionaries that began by posing a direct challenge to the very nature of the economic system.

  In part, this is simply because Americans really had no one else to blame. An Egyptian, a Tunisian, a Spaniard, a Greek, can all see the political and economic arrangements under which they live—whether U.S.-supported dictatorships, or governments completely subordinate to the reign of finance capital and free market orthodoxy—as something that’s been imposed on them by outside forces, and which therefore could, conceivably, be shrugged off without a radical transformation of society itself. Americans have no such luxury. We did this to ourselves.

  Or, alternately, if we did not do this to ourselves, we have to rethink the whole question of who “we” are. The idea of “the 99 percent” was the first step toward doing this.

  A revolutionary movement does not merely aim to rearrange political and economic relations. A real revolution must always operate on the level of common sense. In the United States, it was impossible to proceed in any other way. Let me explain.

  Earlier I pointed out that the U.S. media increasingly serves less to convince Americans to buy into the terms of the existing political system than to convince them that everyone does. This is true however only to a certain level. On a deeper level, there are very fundamental assumptions about what politics is, or could be, what society is, what people are basically like and what they want from the world. There’s never absolute consensus here. Most people are operating with any number of contradictory ideas about such questions. But still, there is definitely a center of gravity. There are a lot of assumptions that are buried very deep.

  In most of the world, in fact, people talk about America as the home of a certain philosophy of political life, which involves, among other things, that we are basically economic beings: that democracy is the market, freedom is the right to participate in the market, that the creation of an ever-growing world of consumer abundance is the only measure of national success. In most parts of the world this has come to be known as “neoliberalism,” and it is seen as one philosophy among many, and its merits are a matter of public debate. In America we never really use the word. We can only speak about such matters through propaganda terms: “freedom,” “the free market,” “free trade,” “free enterprise,” “the American way of life.” It’s possible to mock such ideas—in fact, Americans often do—but to challenge the underlying foundations requires radically rethinking what being an American even means. It is necessarily a revolutionary project. It is also extraordinarily difficult. The financial and political elites running the country have put all their chips in the ideological game; they have spent a great deal more time and energy creating a world where it’s almost more impossible to question the idea of capitalism than to create a form of capitalism that is actually viable. The result is that as our empire and economic system chokes and stumbles and shows all signs of preparing to give way all around us, most of us are left dumbfounded, unable to imagine that anything else could possibly exist.

  One might object here: didn’t Occupy Wall Street begin by challenging the role of money in politics—because, as that first flyer put it, “both parties govern in the name of the 1%,” which has essentially bought out the existing political system? This might explain the resistance to working within the existing political structure, but one might also object: in most parts of the world, challenging the role of money in politics is the quintessence of reformism, a mere appeal to the principle of good governance that would otherwise leave everything in place. In the United States, however, this is not the case. The reason tells us everything, I think, about what this country is and what it has become.

  QUESTION 6

  Why is it that in America, challenging the role of money in politics is by definition a revolutionary act?

  The principle behind buying influence is that money is power and power is, essentially, everything. It’s an idea that has come to pervade every aspect of our culture. Bribery has become, as a philosopher might put it, an ontological principle: it defines our most basic sense of reality. To challenge it is therefore to challenge everything.

  I use the word “bribery” quite self-consciously—and, again, the language we use is extremely important. As George Orwell long ago reminded us, you know you are in the presence of a corrupt political system when those who defend it cannot call things by their proper names. By these standards the contemporary United States is unusually corrupt. We maintain an empire that cannot be referred to as an empire, extracting tribute that cannot be referred to as tribute, justifying it in terms of an economic ideology (neoliberalism) we cannot refer to at all. Euphemisms and code words pervade every aspect of public debate. This is not only true of the right, with military terms like “collateral damage” (the military is a vast bureaucracy, so we expect them to use obfuscatory jargon), but on the left as well. Consider the phrase “human rights abuses.” On the surface this doesn’t seem like it’s covering up very much: after all, who in their right mind would be in favor of human rights abuses? Obviously nobody; but there are degrees of disapproval here, and in this case, they become apparent the moment one begins to contemplate any other words in the English language that might be used to describe the same phenomenon normally referred to by this term.

  Compare the following sentences:

  • “I would argue that it is sometimes necessary to have dealings with, or even to support, regimes with unsavory human rights records in order to further our vital strategic imperatives.”

  • “I would argue that it is sometimes necessary to have dealings with, or even to support, regimes that commit acts of rape, torture, and murder in order to further our vital strategic imperatives.”

  Certainly the second is going to be a harder case to make. Anyone hearing it will be much more likely to ask, “Are these strategic imperatives really that vital?” or even, “What exactly is a ‘strategic imperative’ anyway?” There is even something slightly whiny-sounding about the term “rights.” It sounds almost close to “entitlements”—as if those irritating torture victims are demanding something when they complain about their treatment.

  For my own part, I find what I call the “rape, torture, and murder” test very useful. It’s quite simple. When presented with a political entity of some sort or another, whether a government, a social movement, a guerrilla army, or really, any other organized group, and trying to decide whether they deserve condemnation or support, first ask “Do they commit, or do they order others to commit, acts of rape, torture, or murder?” It seems a self-evident question, but again, it’s surprising how rarely—or, better, how selectively—it is applied. Or, perhaps, it might seem surprising, until one starts applying it and discovers conventional wisdom on many issues of world politics is instantly turned upside down. In 2006, for example, most people in the United States read about the Mexican government’s sending federal troops to quell a popular revolt, initiated by a teachers’ union, against a notoriously corrupt governor in the southern state of Oaxaca. In the U.S. media, this was universally presented as a good thing, a restoration of order; the rebels, after all, were “violent,” having thrown rocks and Molotov cocktails (even if they did throw them only at heavily armored riot police, causing no serious injuries). No one to my knowledge has ever suggested that the rebels had raped, tortured, or murdered anyone; neither has anyone who knows anything about the events in question seriously contested the fact that forces loyal to the Mexican government had raped, tortured, and murdered quite a number of people in suppressing the rebellion. Yet somehow such acts, unlike the rebels’ stone throwing, cannot be described as “violent” at all, let alone as rape, torture, o
r murder, but only appear, if at all, as “accusations of human rights violations,” or in some similarly bloodless legalistic language.m

  In the United States, though, the greatest taboo is to speak of the corruption itself. Once there was a time when giving politicians money so as to influence their positions was referred to as “bribery” and it was illegal. It was a covert business, if often pervasive, involving the carrying of bags of money and solicitation of specific favors: a change in zoning laws, the awarding of a construction contract, dropping the charges in a criminal case. Now soliciting bribes has been relabeled “fund-raising” and bribery itself, “lobbying.” Banks rarely need to ask for specific favors if politicians, dependent on the flow of bank money to finance their campaigns, are already allowing bank lobbyists to shape or even write the legislation that is supposed to “regulate” their banks. At this point, bribery has become the very basis of our system of government. There are various rhetorical tricks used to avoid having to talk about this fact—the most important being allowing some limited practices (actually delivering sacks of money in exchange for a change in zoning laws) to remain illegal, so as to make it possible to insist that real “bribery” is always some other form of taking money in exchange for political favors. I should note that the usual line from political scientists is that these payments are not “bribes” unless one can prove that they changed a politician’s position on a particular element of legislation. By this logic, if a politician is inclined to vote for a bill, receives money, and then changes his mind and votes against it, this is bribery; if however he shapes his view on the bill to begin with solely with an eye for who will give money as a result, or even allows this donor’s lobbyists to write the bill for him, it is not. Needless to say these distinctions are meaningless for present purposes. But the fact remains that the average senator or congressman in Washington needs to raise roughly $10,000 a week from the time they take office if they expect to be reelected—money that they raise almost exclusively from the wealthiest 1 percent.n As a result, elected officials spend an estimated 30 percent of their time soliciting bribes.