The Jubilee

  • A Krainer
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  • October 2010
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Why financiers LOVE democracy (and why the 2010 Nobel Peace Prize went to Liu Xiaobo)

Posted by Alex Krainer on October 12, 2010

Financiers just love western-style democracies. They’re the absolute dream clients. Politicians who promise the most tend to be most popular with the electorate. Once in office, they need not worry about the cost of their promises; if there’s a shortfall in funding, they can always turn to the financiers to borrow the extra funds.

The more they can borrow and spend, the better. After all, spending money is fun and makes you feel all powerful and important. By contrast, repaying debts is no fun and you get to feel small and humble. But paying back debts is irrelevant – it’s a problem for future administrations (well, if they’re smart, they’ll pay the old debts with new debts).

Debt is a liability for the government, but it’s an asset on the financiers’ balance sheets. Debt (+ interest) repayments represent a continuous flow of wealth going from the people whose labor generates it, to the bankers, via the government (through taxes). To keep that flow abundant, financiers encourage governments to incur more debt. Consider the following tidbit from Hillary Clinton’s Congressional testimony involving one of the financiers’ agents, Alan Greenspan:

Hillary Clinton answering to Ron Paul (25 February, 2010): “Ten years ago we had a balanced budget. We were on the way to paying down the debt of the United States of America. I served on the budget committee in the senate and I remember as vividly as it were yesterday when we had a hearing at which Alan Greenspan came and justified increasing spending and cutting taxes, saying that we didn’t really need to pay down the debt. Outrageous!”

How much wealth flows to the financiers in this way? Take the UK, one of the oldest democracies in the West: at present, just the interest payments on the UK’s public debt represents 5% of GDP. So if you live in the UK, every time you buy a loaf of bread, fill up your gas-tank or pay your electricity bill, 5% of that money goes to the financiers – just to cover the interest on the debts. That’s a really sweet deal (if you happen to own UK debt).

The most wonderful feature of western-style democracy is that a country’s debts never go down but tend to balloon with time, and with them the proportion of wealth that’s transferred from those who create it to the financiers. Thus, the BIS (Bank of International Settlements) projects that the payments on the UK’s public debt will double to 10% of GDP within a decade, and will rise to 27% by 2040.

This is why financiers love democracies. Simply, they are great clients and always come back for more. On the other hand, financiers absolutely hate the regimes that refuse to play along. Like China. Imagine if China became a parliamentary democracy and politicians started competing for power in a western-style popularity contest. Imagine China paying 5%, 10%, or 27% of its GDP straight into the pockets of the financiers! Now you’re talking real money!!

If I were a high-powered financier, I’d try to move China in the right direction by supporting pro-democracy dissidents in China. I’d poke at China in my own back-yard through a lot of talk about human rights, freedom of speech, and other such cherished values in the West. I’d also use my influence to arrange for some highly exalted honor like the Nobel Peace Prize to be awarded to one of China’s pro-democracy dissidents. Oh wait, they’ve already done that. Good thinking guys!!!


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