As I observed in my last post, I think that an OWS focus on debt, as Pamela Brown has been advocated, makes a lot of sense. We discussed this in the Wroclaw seminar. I continue to think about that discussion and how it relates to American electoral politics.

The issue of debt provides a way to keep focus on the frustration of the American Dream as it is part of the experience of many Americans, from the poor to the middle class to even the upper middle class. It is an issue of the concern of the 99%.

Yet, there are many activists in and theorists observing the movement who council against this, such as Jodi Dean. Debt is too individualized a problem. It would be better to focus on an issue of greater common, collective concern (e.g. the environment). The issue of debt is too closely connected to the right wing concern about deficits, and criticism of student debt can too easily become a criticism of higher education.

This presents a serious political problem. There is no broad agreement on debt as the central issue, and no leadership structure or decision making process which can decide on priorities. And of course, there are many other issues of contention. Primary among them, in my judgment, is the question of the relationship between OWS and American electoral politics.

It is here where the activists in OWS, like their new “new social movement” colleagues in Egypt and the Arab world more generally, are not prepared for practical politics. Coordinated strategy is beyond their capacity. One faction’s priority, debt or the reelection of President Obama, is not the concern of another’s, or even a position which it is forthrightly against. There are too many different positions within the movement for it to present a coherent sustained position. People with very different positions were able to join with each other and act politically thanks to the new media, but also thanks to that media, they were not required to work out their differences and priorities. They never developed the means to decide them.

Thus, the secular liberal and socialist activists of Tahrir Square have not played a major role in post Mubarak politics, and thus, OWS is struggling as it approaches its first anniversary of the occupation of Zuccotti Park. It is interesting to note that the serious comments to Brown’s recent article on debt discussed not the issue involved but the means by which the issue has been given priority (the other comments were by anti-OWS readers).  But the story doesn’t end here.  Activists continue their work beyond the glare of the attention of the media mainstream.

The problem of sustaining movements, as they are an outgrowth of the way they have formed, should be noted. Yet, while this all intriguing with interesting theoretical and practical implications, I do not think it is of critical importance. Movements don’t legislate and don’t elect Presidents and parliaments and members of Congress. Rather, they shape the political culture (something which I will reflect on more directly in my next post on new social movements in Russia and Israel). Indeed by helping shape the story people tell themselves about themselves, they lead to legislation and election, and sometimes this takes time. This is where the success of OWS is undeniable.

OWS changed the conversation. Inequality again became an issue of broad public concern in the U.S. and beyond. A simple calculation became a theme infusing discussion around the world: “the 99%”and “the 1%.” In lower Manhattan, a symbolic center of global capitalism, a small group of protesters globally unsettled things. While the speech and action within the movement is important, the way it influences the speech and actions beyond the movement is probably even more important.

This is quite evident in American politics. Under the influence of the Tea Party, the discussion in the midterm elections was about debt and deficits and the Democrats received a shellacking, as Obama put it. For a while Obama and the Democrats were humbled, influenced by the Tea Party movement and its momentum, and by the Republican victory. This changed thanks to OWS.

The President and his party found a new voice, often speaking of “the 99%” directly. There is a steadfastness when it comes to the issue of taxing the rich. Obama himself refused attempts by so called moderate Democrats to bend on the issue (instead of ending the Bush tax cuts for those making $250 thousand and over, ending them only for those making over $1 million), and now the issue of inequality is at the center of his campaign. Obama’s clarity, along with his party’s on the issue, along with the way they are trying to define Mitt Romney, all have an OWS accent.

The challenge for activists in OWS, such as Brown, is to extend and deepen this influence. She, like many others, is working to sustain the impact of OWS. I think she is right about this and about the substance of the matter. Debt is a key issue. For the last twenty years broad segments of the population have managed to keep the illusion of the American Dream alive by going into debt. Now payment is due, and the responsibility requires not only individual action, but concerted public efforts to change the rules of the game. And as the Tea Party is a force for capitalism and individualism run wild, it is important that a social movement works to present a clear alternative.

The failure of economics in the runup to and aftermath of the Great Recession has generated a lively debate about how to reform economics and more specifically about the renewed relevance of Keynesian economics, which had fallen out of favor since the 1970s. The Keynesian message, so important in this latest round of political wrangling over the increase in the US debt ceiling, is that cutting government spending in a slump will only worsen the unemployment problem. The role of expansionary fiscal policy, according to Keynesianism 101, is to provide demand for goods (and thus for employees to produce those goods) when the main sources of demand in a capitalist economy — households and businesses – are not providing a level of demand necessary to generate a socially acceptable level of unemployment.

Keynesianism 102 is about the multiplier effect of changes in spending. This is the notion that an increase in demand (from any source, not just government but certainly including government) will impact employment and incomes with a ripple effect. This includes a direct impact and then a secondary impact when the direct incomes are then spent (in some fraction) and an additional fraction of that is spent, etc.

There are two corollaries to the lesson of Keynesianism 102 that are worth mentioning because they have been raised in the current policy debate. The first is about the differential multiplier effect of a spending increase compared to a tax cut. Empirical studies show that the multiplier effect of the former is greater than the multiplier effect of the latter. The second is about the differential multiplier effect depending on the income of the recipients. Since the poor are more likely to spend a higher percentage of additional disposable income than the rich, a tax cut that benefits low-income people will have a bigger multiplier effect than a tax cut that benefits the rich.

These lessons have not been integrated into current economic policy in the US, where deficit spending and progressive tax reform and expanded benefits for the poor and unemployed have been successfully resisted by the Republican congress. Nonetheless, they are well-established lessons of Keynesianism that most professional economists would accept.

The argument against Keynesianism 101 revolves around the psychology of investor confidence in the face of a rising fiscal deficit. The argument is that business people will reduce their investment spending when they see the government deficit becoming very large because it signals the likelihood of some detrimental future adjustment – either in interest rates, tax rates or government outlays – that will be detrimental for future profits. There is simply no empirical evidence to support this theory compared to Keynesianism 101.

But all this is sideshow in comparison to the lesson of Keynesianism 103.  The fundamental economic point of Keynes’s 1936 General Theory of Employment, Interest and Money was not about fiscal policy or the multiplier or income distribution.  It was about the fact that economic equilibrium (a stable condition from which no economic change would occur without external impetus of some sort) will not necessarily be characterized by full employment. Economists prior to (and some subsequent to) Keynes thought that free market economies would naturally adjust to full employment, as an excess supply of labor would lead to a lowering of wages and a corresponding increase in the amount of employment. Keynes explained that the natural state of a capitalist economy is “unemployment equilibrium,” and without a shock to aggregate demand conditions, there was no reason why the economy would not stay at this unemployment equilibrium. Keynes’s insight implied that the wage reduction strategy was not just theoretically wrong but, if implemented, would likely make the situation worse, since it involved a reduction in household buying power and thus would reduce business confidence.

A prospect as disastrous as the second “dip” that the American economy is about to experience is that of a long period of high unemployment that has no natural tendency to reverse itself. We should not stop our analysis at Keynesianism 101 and 102, since the great social problems facing America are understood best by Keynesianism 103.

So what is to be done? Paul Krugman has been a superb critic of the politicians’ focus on the deficit and the debt rather than on job creation. But he has been relatively quiet about what could be done if in fact the political winds were to shift. Robert Reich has been more explicit. His proposals for job creation include:

1. An additional cut in the payroll tax on employees and employers
2. An increase in infrastructure investment

My guess is that President Obama’s speech this evening will address these issues. If it does, it should be understood as not just a political maneuver, but as a serious attempt to tackle our economic problems.

The issue of debt, both public and private, has been a top news story ever since the financial collapse of 2008, but especially in recent weeks with all of the reporting on federal budget negotiations and the debt ceiling. (Another noteworthy item: The New York Times recently reported student loan debt has now exceeded credit card outstandings for the first time and is likely to top $1 trillion by the end of this year.) The problem cultural critic Richard Dienst claims in his new book The Bonds of Debt: Borrowing Against the Common Good (Verso: 2011) isn’t that debt levels are too high; it’s that they aren’t high enough.

A critical and literary theorist, Dienst expands the concept of debt from its purely economic connotation to include social reciprocity broadly understood. The “magic” of debt, Dienst asserts toward the end of the book, is that it ultimately constitutes a common good by binding us inextricably to one another. Debt as conceived under the capitalist system has in the current environment been revealed as an apparatus of capture that has reached its penultimate “terminal crisis” to use Giovanni Arrighi’s term, opening the door to new world-historical possibilities of social interdependence and human understanding.

Dienst begins by reviewing the ideas of several key theorists of late capitalism. From Robert Brenner he takes the notion of global capitalism as a system in perpetual turbulence. He places Brenner alongside Arrighi’s application of the Kondratiev Curve in the modern world-system analysis of the development of capitalism since the fifteenth century, which essentially tracks that turbulence at a macrolevel. He finds further complement with David Harvey’s recent books on neoliberalism that extend the primarily economic arguments of Brenner and Arrighi into the realm of politics and ideology. And as Dienst notes, the recent financial crisis came as no surprise to any of them.

The question Dienst raises is: If we agree that these thinkers have aptly described the circumstances that have brought us to our present state, then where do we go from here? As he looks to the horizon, Dienst observes: “All roads to the future lead through an immense pile of debt.” How to negotiate that terrain is the central problem.

Bono with George W. Bush, 2002 © Ron Edmunds | AP

As previously noted, Dienst is a cultural and literary theorist not an economist or other social scientist. His book doesn’t specifically examine the economic and social foundations of the credit system and its role as the obverse of modern mass production, the mechanism that allows demand to absorb excess capacity over time. Instead he analyzes media images – most notably, Bono’s 2002 photo op with George W. Bush on the issue of global poverty showing a solemn Bono giving the “V” sign and striding alongside Bush whose raised outstretched hand reads as both a greeting and an imperial salute – and other aspects of culture, such as retail display design, that constitute the spectacle mystifying the true relationships of power that keep debt under the control of the world’s haves and have-mores.

More pragmatic readers may find this path less than satisfactory. But in deconstructing the hegemonic representations of debt that have been deployed to promote austerity as the only viable solution, Dienst calls on the reader to consider what is truly owed by whom to whom. In this way debt becomes a medium for the expression of political consciousness. From this perspective, breaking the bank doesn’t sound like such a bad idea.