Citizens of Greece are demonstrating against the austerity plans demanded by the European Union. Citizens of Iceland have actually rejected an agreement to pay their debts. California teeters on the edge of bankruptcy – but can a sovereign state actually declare bankruptcy?
According to an article on Slate posted Monday, the answer is “no.” We are in the presence of an anomaly, stressful to government officials, worrisome to bankers, confusing to citizens – and sometimes enraging to them as well. Our conventional categories of thought about sovereignty no longer work.
Once again, economic ingenuity and need has outstripped political and legal developments. Globalization and financial markets have rendered us mutually dependant in previously unimaginable ways. But legally we are in a no-man’s land, a limbo of agreements, understandings and assumptions that no one actually has the authority to enforce. No one is in charge, and that means everyone is anxious.
Slate’s Christopher Beam writes matter-of-factly: “There’s no international bankruptcy court for countries that can’t pay their debts. Instead, other EU countries that depend on Greece’s solvency, such as Germany or France, would have to agree to bail it out.” (See, “Can California Declare Bankruptcy? And What About Greece?”)
Oh? And what if that is unpalatable to Germany and France. The Obama administration is in trouble with voters for having bailed out our own banks. It’s not too hard to imagine voters in Germany and France balking at bailing out Greece, and, in fact, there are signs that they may well be unwilling to do just that.
The psychological problem here is that, as our minds approach these black holes, the discontinuities where chaos lurks, they tend to stop working. Without a map, lacking precedents and traditions, overwhelmed by dread, our minds fall back on weak assumptions — or turn away.
I think that something like this afflicted us during the financial meltdown in 2008. Federal officials scrambled to put together a series of desperate strategies to keep the system from crashing. They slogged through and averted a crash, while most of us watched from the sidelines unable to grasp just how much at risk we all were.
European officials may also slog through this one too, but it’s worth our while to consider the power of such moments to evoke terror.