I
If I am reading historians Istvan Hont and Michael Sonenscher correctly, 18th century thinkers wrestled again and again with the constitutional means for reining in the bad-side of public debt (e.g., rulers use the monies for war), while promoting the good-side (e.g., rulers build the infrastructure Adam Smith himself saw necessary for human betterment).
Today, what to do about the public debt is even further from settked. Constitutional proposals to ensure balanced budgets have come and gone; actual constitutional amendments, e.g. Germany’s restricting budget deficits to no greater than a certain percent of GDP, are suspended or circumvented. Green golden rules are proposed today that “would exclude any increase in net green public investment from the fiscal indicators used to measure compliance with fiscal rules,” recognizing however that “by allowing green spending to be financed by borrowing. . .could undermine public debt sustainability”. Etc. Etc.
In fact, nations now divide into two with respect to public debt: those that kick their public debt bucket down the road and those finding it more and more difficult to do so. ““This idea that we can continue to kick the can down the road” is no longer tenable,” [an expert recently put it about this debt]. “That horizon is coming very much closer to us.”” Even closer when you add the increasing pressure on governments to pick up private-sector pension commitments that can’t be met.
What to do?
II
One answer is to rethink the public debt beyond “it’s our investment in the future.” Not that the latter isn’t true, but rather its truth-value and contexts need to be pushed further if we are to render the currently intractable debt more tractable.
How? For starters, think of public debts like keystone ecosystems, the way groundwater systems are central to other dependent terrestrial and aquatic ecosystems. Or that public debts are the infrastructures experienced as the social property of the propertyless, who know best when and how to depreciate their assets. If the public debt is our ruination, then we have to push that point further to how public debts are experienced, here and now.
III
This experience of public debt in real time is the perfect place to start reframing. Begin with the 2020 Zambia government default:
Zambia defaulted on interest payments to some of its private lenders in November 2020 when private creditors refused to suspend debt payments. In February 2021, Zambia applied for a debt restructuring through the Common Framework, but little progress has been made on the negotiations as large private creditors, such as BlackRock, have so far refused to reach an agreement on debt relief.
BlackRock, headed up by Larry Fink, is the largest of a number of bondholders who are refusing to cancel Zambia’s debt, despite lending to the country with interest rates as high as 9% (in comparison to wealthy countries like Germany, UK and USA who were given loans at 0-2% interest in the same time period) potentially making huge profits. Debt Justice estimates that BlackRock could make up to 110% profit if repaid in full.
Meanwhile, Zambia is experiencing devastating impacts of the climate crisis such as flooding, extreme temperatures and droughts, which are causing significant disruption to livelihoods and severe food insecurity. Unsustainable debt levels mean the country lacks many of the resources required to address these impacts. This decade, Zambia is due to spend over four times more on debt payments than on addressing the impacts of the climate crisis.
It should be noted that compared to BlackRock, only two nations, the USA and PRC, have GDPs greater than the wealth managed by BlackRock (whose recent assets are reported to be well over $10 trillion). It’s also reported that the ten largest asset-management firms together manage some $44 trillion, roughly equivalent to the annual GDPs of the USA, PRC, Japan and Germany.
That said, yes of course, we still must say that this and other current sovereign debt crises could be better managed. Fair enough.
But it would be more accurate to say that BlackRock is actually being managed in ways the sovereign debt crisis can’t, i.e., BlackRock has a C-suite nations don’t have. Why then not start with BlackRock as the catalyst for better management? (After all, it rose to an undisputed shareholder superpower only after the last financial crisis of 2008.)
Or from the other direction, think of BlackRock as the global financial crisis underway and the “sovereign debt crisis” as the smoke-and-mirrors to get the rest of us to believe otherwise. We know exactly who benefits from placing the blame on the Government of Zambia’s fiscal and monetary management, when the global behemoth BlackRock is managed even worse in terms of self-interest.
IV
Consider another example of how to reframe the public debt (or at least the experience of that debt): off-budget items as a way of funding that can’t be financed through public debt:
The EU cannot finance its budget through debt, but the EU Treaties do not prohibit the issuance of EU-27-backed securities or bonds for off-budget operations, as long as they are approved by the Council. The largest collective borrowing operation in EU history so far was the temporary Covid-19 recovery program NextGenerationEU (NGEU), which received 90 per cent of its financing through the Recovery and Resilience Fund (RRF) for which the European Commission borrowed €807 billion on behalf of the EU-27 by issuing green bonds. NGEU presents itself as a green industrial investment program for the benefit of future generations, but it is pervaded by a fundamental contradiction: the repayment involves an intergenerational debt transfer, burdening future generations with €30 billion in annual debt servicing , starting in 2028 and ending in 2058.
Angela Wigger (2025). “Behind InvestEU’s Trojan Logic: Public Guarantees, Private Gains, and the Illusion of Climate Action,” accessed online at https://www.nl/behind-investeus-trojan-logic/
Here focus on the bolded terms: off-budget operations and intergenerational debt transfer.
Once upon a time, the basic idea of a budget was to be comprehensive. There’s nothing “off-budget” if the objective is constrained maximization of system benefits net of expenses. Of course, that hasn’t stopped all manner of moves to sequester below-line expenses as if they weren’t subject to budget constraints:
Technocrats’ creative reinterpretation of their own authority and governments’ creative fiscal accounting via off-budget financing vehicles can improve fiscal-monetary coordination and create significant fiscal space (van ’t Klooster, 2022; Guter-Sandu and Murau, 2022). However, the hidden and interim nature of these solutions preempts. . .
(accessed online at https://scispace.com/pdf/green-macrofinancial-regimes-2o45dbuoim.pdf)
Article titles, like “The Eurozone’s Evolving Fiscal Ecosystem: Mitigating Fiscal Discipline by Governing Through Off-Balance-Sheet Fiscal Agencies,” give the game away.
Nor does the increasingly out-of-date riposte work, namely: Future generations will have more income than we to cover these debts, invisible or otherwise. We’re in times of decreasing per-capita incomes and near-zero discount rates, where the generations ahead are to be treated just as alive as we are. Note also that if you agree, then the wider declension narratives at work—apocalypse, catastrophe, polycrisis—undermine the very persistence of concepts, like government budgets, intergenerational debt and “future generations.”
So, again, what’s to be done? Again, reframe. What life-worlds already exist that do not rely on these terms, budgets, debt and generations; apocalypse, catastrophe and polycrisis? That is, in addition to the always-on search for alternative social movements, we are looking for those breaches in political economies and heterogeneities that displace, re-situate or unaccent the terms that now leave us nowhere else to go.
V
“Breaches and heterogeneities”? That level of analysis requires us to be more granular than appeal to abstract levels of this or that political economy. For example, it’s not varieties of capitalism (or anti-capitalism for that matter) we are looking for but rather specific hybrids and subsystems. Let’s take the example of free ports as illustrative.
The instance of free ports would seem to take us right back to the heart of capitalism, with its Special Economic Zones (SEZ) and such. But we would be wrong. The authors of a recent global study of free ports, Koen Stapelbroek and Corey Tazzara (2023), stress their own version of “off-balance sheet”. “Free ports offered essential services that the prevailing system of political economy scarcely allowed.” More specifically:
Rather than treating free ports as intrinsically liberal or illiberal, it is better to see them as controlled breaches in the prevailing political economy, whether that be of a state or of an entire trading system. With respect to national political economy the breach is obvious, since by definition a free port policy entailed a relaxation of ordinary controls over trade and often other parameters such as immigration. The extent of control varied for reasons ranging from technology to the fiscal trade-offs unavoidable in any customs policy. The underlying strategy varied, too – in some cases, free ports served to stabilise a state’s political economy (as in Genoa), in other cases as a forerunner to transform the interior economy (as in the Caribbean). The free port shows that the modern state has never endorsed homogeneous space: there have always been breaches, sometimes of great importance.
Koen Stapelbroek & Corey Tazzara (2023) The Global History of the Free Port, Global Intellectual History, 8:6, 661-699, DOI: 10.1080/23801883.2023.2280091
So what? What does this mean practically?
Consider a familiar recommendation: “Suspend and cancel debt payments when a climate extreme event takes place, so countries have the resources they need for emergency response and reconstruction without going into more debt.” This statement has no semantic meaning for really-existing policy and management in the absence of drawing conclusions from the run of diverse cases of “extreme events,” including but not limited to equally granular cases of free ports.
WHEN COMPLEX IS AS SIMPLE AS IT GETS 