I’ve been thinking about some of the issues around events in Greece and also ‘public concern’ over government debt in many other countries, including here in the UK where all three main parties are promising austerity in order to sort out the ‘public finances’. From the perspective of the financial markets, the number everybody’s talking about is the spread on bond yields between Greek government debt and that issued by the German central bank. The spread — or premium — is essentially the difference in interest rates. At the moment, financial investors are demanding a premium of almost four and a half percentage points for Greek 10-year bonds over 10-year bunds. Put the other way round, while at the moment the German government pays an interest rate of about 3% on its new borrowing, the Greek government must pay 7.4%. Investors are demanding this higher yield — this premium — because they fear sovereign default, i.e. there’s a risk the Greek government won’t be able to repay and investors want some reward for taking on this additional risk they won’t get their money back. (Of course, investors fear sovereign default because of the ‘structural’ problems in the Greek economy — low productivity, too generous social entitlements, etc. — and the fact that, so far, Greek workers are resisting attempts at ‘structural readjustment’.)

The problems don’t just affect Greece. Portugal, Ireland and Spain have all been mentioned. But also Britain. Britain’s public debt is almost at the level of its GDP and, if it continues on its present trajectory, debt will rise to more than five times the level of annual output by 2040. This is ‘unsustainable’. In the words of three Bank for International Settlements (the central bankers’ bank) economists: ‘the question is when markets will start putting pressure on governments, not if’. These economists are talking about investors demanding higher yields — increasing the interest rates that governments must pay to borrow money. The circle is a vicious one, because higher interest rates mean the burden of higher interest payments and an ever-worsening fiscal position — in the absence of what the BIS economists call a ‘fiscal consolidation programme’.

There’s a lot to said about ‘market discipline’ (what it means for ‘the markets’ to ‘put pressure’ on entities like governments or populations), as well as about struggles around structural adjustment and austerity. What I’ve started thinking about is capital’s flight. Capital flees Greece or threatens to flee Greece, unless it receives that premium. Capital is threatening to flee Britain — and the ratings agencies are warning the UK may lose its AAA credit rating, which would herald higher interest rates, again a premium reflecting a slightly higher chance of sovereign default. But this fleeing capital… Where’s it gonna run? It can’t all wind up in Germany (the ‘strongest’ EU economy)? What about China? Some of it’s taking refuge in gold, whose price (now at more than $1,100 per ounce) has risen three-fold over the past decade. The problem with gold, of course, is that it isn’t productive in any way: it’s a ‘store of value’, but the only ‘rate of return’ it produces is a result of its rising price (kind of like housing) and it certainly doesn’t contribute to the production of value and surplus value, through the exploitation of human labour — the lifeblood of capital.

So we have a story of flight. Following the crises of the 1970s, capital fled the factories of the First World. It headed South, to Latin America and Africa, so stoking the international debt crisis of the ’80s. Then it fled some more. To China, to India and other ’emerging markets’. It also sought refuge in finance, seeking a return from and a safer haven in government debt, in household debt and so on. But the present crisis has forced it to flee some more. What I’m wondering is: first, where can capital flee to next? second, if capital is fleeing, are we chasing; can we ‘chase it out of Earth, send it to outer space’? And third, how useful to our struggle is this story?