Democracy and the debt crisis – why political theology needs to wake up from its moralistic slumber

Now that America’s fiscal cliff has been averted, the press and public attention are turning quickly to the next looming “crisis” – the debt ceiling.

For many of today’s liberals, the debt ceiling issue is little more than a red herring. Partisan politics and convoluted political rhetoric aside, the left tends to view the unremitting explosion of America’s sovereign debt as as simply a matter of ensuring that everyone pay their “fair share.” Political resistance to using the debt ceiling, as the right is accustomed to doing, as leverage to force systematic spending cuts is dismissed as a power play on the part of the wealthier interests to do what “every” fair-minded person somehow knows is the only just solution – i.e., raising taxes as much as is reasonably manageable.

And even when skeptics point out, as they already have following the recent standoff between the White House and Congress that by consensus the left handily won, that a so-called “balanced approach” that hardly touches the incomes of the middle class empirically has little long term effect on the deficit, the reaction naturally is denial, avoidance, scorn or an equable mixture of all the above.

If this harsh reality is finally faced four-square, the tendency is either to embrace the view of a polemicist like Paul Krugman who argues that deficits do not actually matter anyway, or to fantasize that somehow all our woes are but the last, unavoidable crisis of capitalism that will all be somehow be resolved both apocalyptically and providentially when the global economy crashes in perhaps the not-too-distant future.

Marx once wrote caustically of utopian socialists who were forever dreaming the dream of “in loco communis.” The same cutting edge might be applied to the present generation of tireless – and tiresome – academic critics of “capitalism” in the abstract, who without the foggiest notion of how the global economy really works are constantly dreaming “in loco revolutionis”, forgetting Lenin’s famous dictum, so to speak, that revolution is not a Boston block party.

Conversely, the right – not exclusively but largely in America – increasingly falls back on a pre-Keynesian and ideologically sclerotic mantra that everything comes down to “freeing” the private sector along with individual private investors to use tax-free money to create jobs, which somehow will magically materialize when the burdensome hand of government is lifted.

The debt crisis is framed as a kind of modern day morality play to instill the sense of conviction and the fear of judgment in those who would continue to vote for politicians – i.e, those on the left – who promise government-authorized benefits and entitlements when the latter amount to nothing more than unproductive, or “wasteful, spending.

Notwithstanding that such “entitlements” often amount to real consumer spending that would goose the very markets that conservatives and economic libertarians so highly prize, and that the elimination of this spending – as the experience in Greece painfully demonstrates – creates a vicious cycle of lowered production and consumption together with increased debt and rates of debt servicing, the argument seems to appeal to the very real sense of “moral hazard”, as it is now called. It was the same fear of a similar specter that John Maynard Keynes argued was one of the key factors in the persistence of the Great Depression.

The Failure of Mainstream Economics and the Challenge for Political Theology

Outside the political arena, the present impasse shadows an even more troubling and unprecedented double-mindedness among professional economists. The division of opinion is greater than it was even in the now largely forgotten era of “stagflation” when Keynsian economics fell into disrepute and the kind of dogmatic monetarism that had much to do with the collapse of 2008 began its slow, short-lived ascent to dominance.

Right now, as the prestigious British magazine The Economist observed in the summer of 2009, what three years later is still an ongoing economic crisis has spurred “a crisis of confidence in macroeconomics.” The same article goes on to suggest in its own terms that economists need to come down from their cloud and recognize that it was because they foolishly have longed believed they could predict vast trends in aggregate market behavior with the aid of mathematical modeling that they have recently been broken on the wheel.

At the same time, the new humble pie diet of economists, barring a few noisy exceptions, has not been matched by the ever sanctimonious blather of politicians. As Keynes lamented over a half century ago, politicians routinely rush in where economists fear to tread. Moreover, not only will the former, particularly in times of uncertainty and social anxiety, make ever more grandiose but groundless claims, the public will even believe them.

And that brings us to the essential point of this essay for a blog concerning political theology. Political theologians tend to shy away from economic issues, in the same way that Christian evangelicals are apt to eschew artistic controversies, unless the latter naturally presents some cause for moral offense. Not only are economic issues messy and wrongfully territorialized by fast-talking academic hucksters with souped-up computer algorithms, they seem hopelessly impervious to the sorts of implicit socio-ethical agendas that drive so much political theology.

Political theology, as even Augustine who long ago “invented” the discipline understood, is founded on the historically double-minded field that we used to call “political economy,” a curious hybrid formation that harks all the way back to Aristotle. In his Politics, Aristotle made it clear that one cannot separate how one runs a “city” (polis) from one how one manages a “household” (oikonomia).

Furthermore, neither “science” is conceivable without a preliminary consideration of the nature of the “good” (kalon) in both a singular and collective sense as well as some notion of how to identify its first principles.

Political theologians tend to focus on this kind of prolegomenon to political economy for natural reasons without understanding that all three variables in Aristotle’s concept of the true politeia have to be thought as a unity. They are far more interested in the morality of distributive justice, or even the prioritization of personal character that we find in virtue ethics.

Yet is the domain of the oikonimia that Aristotle found more important than that of the politeia, mainly because it is in this sphere that the organization of private desires serves either to augment or corrupt the pursuit of the “good” collectively in the form of “justice” (dikaiosyne), including the strategies for a proper administration of the laws. Following Aristotle, we cannot grasp the occasioning elements of the debt crisis without looking at how these three variable interact in some sense nowadays.

The Debt Crisis and the “Irrational Exuberance” of the Consumer Economy

As Daniel Bell noted not quite a half century ago, an economic crisis has arisen in post-World-War II America – and by extension the whole of the planet because of the spread of American values – because the religious belief structures Max Weber theorized as the dynamic source of economic expansion in the West have been turned on their head.

Bell wrote in 1970 in The Cultural Contradictions of Capitalism (Basic Books, 1970) that “the social structure…is ruled by an economic principle of rationality, defined in terms of efficiency in the allocation of resources; the culture, in contrast, is prodigal, promiscuous, dominated by an antirational, anti-intellectual temper. The character structure inherited from the nineteenth century–with its emphasis on self-discipline, delayed gratification, restraint–is still relevant to the demands of the social structure; but it clashes sharply with the culture, where such bourgeois value have been completely rejected.”

Bell was talking about the way in which material desires because of a variety of “consumer innovations” in the second half of the twentieth century (e.g., credit cards, media messaging, etc.) have generated an expectation of the fulfillment of unlimited wants, while these deeper changes have slowly undermined the capacity of the system to satisfy them. The same lesson has applied to investors, who have become more and more like consumers. The urge for a quick return rather than the patient husbanding of resources fosters what Alan Greenspan famously termed the “irrational exuberance” that has fueled so many asset crazes in the last two decades.

As Louis Hyman underscores in his book Debtor Nation: The History of America in Red Ink (Princeton University Press, 2011), the stimulation of more and more consumer wants was not the result merely of America losing its commitment to thrift or runaway hedonism and venality. It was an imperative of the economic system derived from the “Keynsian turn” in the 1930s that emphasized the importance of aggregate demand over production and supply. When business could not encourage people to spend more, the government had to take up the slack.

But this form of “moral hazard” as applied to the oikonomia in Aristotle’s equation had unintended consequences that neither earlier Keynsian economists nor radical redistributionists could have foreseen. That was the rising up of the great rough beast – the new overmathematized global financial system – that with one sweeping swat of its paw brought down not only banks, but the solvency of both households and consumers after the 2008 collapse.

The Crisis of Capital

According to Hyman, and to a certain extent according to a recent paper published by the World Economic Association, the run-up to the financial crisis can be attributed in significant measure to the diversion of capital over the last few decades away from investment in new technologies and services that would enhance productivity and thereby increasing social wealth and its redirection into fixed assets, such as real estate, as well as commodity speculation.

There are a number of key factors at work in this drying up of productive investment – hence the now widely bemoaned “financialization” of the global economy. But hyper-Keynsianism has more to do with the trend than many realize.

First of all, stimulating consumer desires per se, which would lead to innovation and productive investment, is something politics cannot effectively do. But the political process can make money available easily, and the dominance of monetarism in economic theory aided and abetted a one-sided Keynsianism that rhetorically stressed fiscal stimulus without fiscal discipline.

If it were not for foreign debt-buyers – a phenomenon in itself resulting from global imbalances in the economic flows of capital and debt servicing that reflect early stages of capital accumulation on the part of the emerging world – this stimulus could not have been very long sustained.

Thus both monetarism and the cheap Keynsianism that came into play in the 1990s while entrancing both Democratic and Republican administrations created “asset bubbles” (the dot-com fiasco at the turn of the millennium as well as the housing inflation of the ensuring seven years) that politically deepened the sense of political entitlement that is the bane of the near future.

We could go on with this analysis, but that is not our task here. The debt crisis is first and foremost a political crisis. Addressing the crisis intellectually at minimum requires a political theology that challenges not only the addictive psychology of social entitlements (the phenomenon Nietzsche rightly dubbed resenntiment), but both the economic fantasy of pure redistributionism and the self-serving illusions of laissez faire economics, which created the global financial monster and its demon spawn in the form of the debt crisis in the first place.

It is one of the paradoxes that the discourse of the Western intelligentsia increasingly talks about the “sustainability” of ecological systems without accounting at the same time for what that means for the sustainability of economic systems. Ironically, both terms are adduced from Aristotle’s oikonomia.

A political theology of the future will have to examine the systemic axiological and behavioral dimensions of what it claims are the connection between “God”, the transcendental, and what since Plato’s time we have prized unfortunately solely on its own terms – the politeia itself.

Otherwise, we run the risk not only of irrelevance, but of going down with the Titanic of Western democracy that is presently nearing its iceberg. Do we really want to give the last word to Keynes, who famously said that “in the end we’re all dead”?

Carl Raschke is Professor of Religious Studies at the University of Denver and author of numerous books, including his most recent one The Revolution in Religious Theory: Toward a Semiotics of the Event (University of Virginia Press, 2012). His forthcoming Force of God: Political Theology and the Crisis of Liberal Democracy touches on some of the issues discussed in this article. His website can be found at http://www.carlraschke.com.