Colonialism, Debt & Democracy

October 19, 2008 — George Molson

Almost every country is now in debt, but little is understood by most how this came to be and what its implications are. Put simply, a country in debt is not truly sovereign, but rather it is accountable to its investors who determine the terms under which the debt will be repaid. What´s more, unlike the promises that a politician makes to the public, investors in nations have contracts that are legally binding, meaning that the deals that a nation signs with its investors supersede any demand made by the public. Understanding this situation fully reveals that global investors are the true holders of binding power, not politicians, as regardless of what party or politician gets elected they are ultimately bound by the same contracts.

The next question that follows is, “how did this come to be?”. To answer this question fully we need to take a few steps back and understand the history that lead up to most nation-states gaining their “independence”. Most nations were created by colonial masters such as Britain, France and Spain who setup colonies that paid a fixed percent of their gross production in the form of tribute. During the so called “end of the colonial age” the colonial masters realised that if too many of their colonies rebelled at the same time that they would be unable to fight a war on multiple fronts simultaneously and would loose control over their income bearing foreign assets. The result was that they gave their colonies their own flags and their own parliaments, but the one freedom that they did not give them was their economic freedom. Instead the colonies were issued fiat, or paper based debt whose interest payments were roughly equivalent to their former obligations in the form of tribute. The next things that the colonial masters did was break the interest bearing certificates into bonds that could be resold, and they then diversified so that if any individual colony was to default on payment they would not loose the total value of their holdings. In essence, the best way to prevent people from fighting for freedom is to convince them that they already have it; colonialism never ended, it just took on different forms.

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Anup Shah, Causes of the Debt Crisis, GlobalIssues.org, Last updated: Sunday, June 03, 2007