The Way of All Debt

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A perturbation arising from the American market in subprime mortgages has spread through the banking system to disrupt economic activity throughout the world. The pattern of cause and effect will be debated for many years, with historians asking when and how the global economy was set on the path that led to its current condition. Already there are some who trace the crisis to decisions of Alan Greenspan, chairman of the board of governors of the Federal Reserve from 1987 to 2006, when he responded to events such as the collapse in the late 1990s of a hedge fund, Long Term Capital Management, and the subsequent bursting of the dot-com bubble by creating a climate of easy borrowing, which in turn inflated another bubble in the housing market.

Others suggest that a change in the legal system of banking brought about by the repeal in 1999 of the Glass-Steagall Act of 1933, which had aimed to limit speculation by separating commercial and investment banking, created an environment that allowed reckless lending. Yet others explain the turmoil in world markets as a symptom of an endemic instability in the type of finance capitalism that has developed in America, Britain, and some other Western countries.

These accounts are not mutually exclusive, nor are they in any way exhaustive. Like most of the narratives that offer to tell us how the world arrived at its present pass, they are primarily economic in focus. To be sure, this is an economic crisis; it might therefore seem to follow that it is best explained in economic terms. But economics may not give a satisfactory understanding of the events of the past year. The changes that have occurred are not only in the world economy. They include shifts in geopolitics, involving aspects of the rise and fall of nations that go beyond their economic performance, and an erosion of values.

The dislocation that is being produced by the financial crisis affects political and moral beliefs that have supported capitalism in the past. Market economies are not underpinned chiefly by economic theories. They rely for their legitimacy and continued functioning on ideas about right and wrong, fairness in society, and orderliness in the world. In the boom years many of these ideas were discarded as erroneous or redundant. Now that the boom has been followed by bust it may be useful to reexamine ideas about debt, and consider how they may fare as governments use all the instruments at their disposal to avert a slide into depression.

One of the many impressive features of Margaret Atwood’s new book is its almost eerie timeliness. Consisting of five chapters that were broadcast in November 2008 by the Canadian Broadcasting Corporation as the Massey Lectures, a series intended to provide a radio venue for the exploration of important issues, Payback appeared in print last October. The book must have been written some months earlier, but there is no sign that it was composed in haste. Atwood examines the role …

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