Government debt, do you understand it?

[ska invita]

I really dont. Ive tried repeatedly, read books , articles, podcasts.... other than a vague "its not like household debt" and "its kind of okay for government to print money" i just cant get any deeper than that

We are about to have more austerity thanks to Labour who believe UK debt is too high - and it is sort of at a postwar high


then in the news this week the USA is on a massive (Keynesian?) "borrow and spend" splurge, plus a dose of protectionism, leading to this pretty amazing headline

Faisal Islam: Could the US economy be doing too well?

The US economic boom has consequences for the global balance of power - and for the UK.

www.bbc.co.uk

Obama did the same in 2008 whilst the UK government went full on austerity

I cant really get the conversation going more than that, but if someone feels like they can explain it to me in simple terms that would be great. Here's a question, what would be the consequences if Labour went on a similar borrow and spend splurge - what would be the consequences. How much borrowing is too high?

 

[danny la rouge]

This is about as clearly put as I’ve come across:

Why the government bonds owned by the Bank of England are not a debt burden, even when they’re repaid

I received this email very recently, and share it with the author’s permission: Hi Richard, Hope you're well. After reading some of your articles and watching one of your videos, I'm left with a question that I hoped you could answer. The Bank of England holds lots of government debt. What...

www.taxresearch.org.uk

 

[MickiQ]

Government debt is a bit of a misnomer it's not like personal debt where you have to pay it back or get a bad mark on your credit record (or someone comes round to break your legs depending on the lender) It's actually an investment on which the investor gets a return. The thing is of course the interest on it has to be paid which is currently about £106 billion (about twice what we spend on defence or half what the NHS costs). This is a lot of money that could be spent on other more useful stuff/given away as bribes to the voters (sorry tax cuts) rather than just given to investors letting the UK borrow their money. Bringing govt debt down is in itself a good idea it's the tax rises/ public spending cuts that are needed to do it that cause all the hoohah The ideal way to reduce it is economic growth (which means greater tax revenues) but alas this seems as faraway as ever.

 

[Saul Goodman]

There's no such thing as government debt. The government merely accrues debt on the taxpayers' behalf.

 

[ska invita]

There's no such thing as government debt. The government merely accrues debt on the taxpayers' behalf.

arghhhh!!!

 

[ska invita]

This is about as clearly put as I’ve come across:

Why the government bonds owned by the Bank of England are not a debt burden, even when they’re repaid

I received this email very recently, and share it with the author’s permission: Hi Richard, Hope you're well. After reading some of your articles and watching one of your videos, I'm left with a question that I hoped you could answer. The Bank of England holds lots of government debt. What...

www.taxresearch.org.uk

i think i have to just give up if thats the easy version


shame though as i think a common wider understanding of governmental economics is a massive hurdle to overcome

 

[danny la rouge]

i think i have to just give up if thats the easy version


shame though as i think a common wider understanding of governmental economics is a massive hurdle to overcome

Economics as a science has all the validity of horoscopes. Even economists don’t understand it.

 

[ska invita]

Economics as a science has all the validity of horoscopes. Even economists don’t understand it.

I dont even understand what it is they dont understand though

 

[petee]

then in the news this week the USA is on a massive (Keynesian?) "borrow and spend" splurge

if you're only hearing about it this week, the journalists across the pond have fallen down. the biden administration has borrowed money at astounding rates, and is paying decent interest on it too.

plus a dose of protectionism

this is a knee-jerk reaction to the america-first rhetoric of the trumpers. biden is tring to do just enough to appear "patriotic" that trump can;t use it against him in the election. if he gets re-elected that'll all tone down.

 

[MickiQ]

Economics as a science has all the validity of horoscopes. Even economists don’t understand it.

It's not as bad as that, there are some basic rules that pretty much everyone agrees on but calling it a science like physics or chemistry is just daft. It's also a field in in which principles are held or rejected based on the political leanings of the individual economist. The same isn't true of actual sciences the result in a chemistry experiment isn't affected by what people believe.

 

[ska invita]

if you're only hearing about it this week, the journalists across the pond have fallen down. the biden administration has borrowed money at astounding rates, and is paying decent interest on it too.

this is a knee-jerk reaction to the america-first rhetoric of the trumpers. biden is tring to do just enough to appear "patriotic" that trump can;t use it against him in the election. if he gets re-elected that'll all tone down.

its almost never reported in Britain how much the US borrows IME - its kind of fascinating, because the British right fantasise about the US system but utterly miss this part of it - maybe willful ignorance but more likely just ignorance

.

 

[yield]

ska invita have you read this?

The World According to Modern Monetary Theory

Looking past money to the sovereign power that makes it valuable

thenewinquiry.com

 

[Fez909]

I think I understand it, so will try to explain it patronisingly simple terms. I'm sure someone will correct my misunderstandings, and that'll help both of us (see Cunningham's Law).

Money isn't real.

It has no intrinsic value. It's just a tool to put value on goods, services and time, making trade easier.

The govt issues money so that citizens can trade and engage in economic activities.

Governent Spending

The government also needs money to trade (buy things, pay people, to provide public services etc). They get this money from taxes. Most of the time, taxes don't cover spending, so they have to borrow it.

Bonds

Issuing bonds is how the government borrows money. Bonds are like loans: the government promises to pay back the borrowed amount with interest at a later date.

The bonds pay interest, which is similar to dividends on shares. But unlike shares, they also have a maturity date, when the borrowed amount must be paid back. Also, bonds don't give you any control like a share would (voting rights, etc). It's purely financial.

Buyers

Anyone can buy these bonds, in theory, but it's mostly big corporations, and big banks, like HSBC and Citibank.

Interest

The interest on the bonds is based on the Bank of England interest rates.

So you might think they could set the interest rates really low to make borrowing cheap and cheat the system?

Well, they could. They can set them to anything they want. But the organisations that buy the bonds have no obligation to buy them.

Investments are always risk vs reward. You can 'risk' 2p on the penny falls, but you'll never win £1m. You might win £1 if you're very lucky, but the most you'll lose is 2p.

Likewise, if the risk is very high, the rewards have to be high, too, otherwise why would you bother? Imagine a penny falls machine, but each play cost you £10, and you still only won whatever two pence pieces came out. You wouldn't play.

So, if the interest rates are deemed to be low, based on how the country as a whole is doing, then why would you buy UK bonds?

Default Risk

If the country doesn't earn enough tax revenue to pay for services, then they sell bonds to get more money. But now you have to pay for the services provided AND the interest on the bonds.

This leaves you two options: Increase tax revenue or reduce services.

If you do neither, and you can't afford to pay the interest on the bonds, then that's a default.

So the interest rates on the bonds have to reflect a realistic view of the country's economy, based on its ability to pay back your investment+interest, from current or future tax revenues. Similar to shares again.

National Debt

This is what we call the total value of all bonds issued.

Money Supply

If you can magic up more money, as the BoE can, then in theory you could create enough to pay off all the bond holders and now you're debt free.

But this is a bit like seling a limited record for mega money, then pressing a load more once they've sold out. You'd piss off the people who bought the first pressing, as they paid more when it was rare, and now its value has depreciated.

They're unlikely to buy your bonds again in the future. So unless your tax revenue now covers your services 100%, you're fucked. So the bank doesn't do that, as it needs to sell more bonds in the future when the current ones mature.

Balancing Act

Actually, the Bank does print money all the time, and it does reduce the value of the bonds. And increases inflation, as there is more money circulating in the economy, but 'chasing' the same amount of goods.

Inflation

If it now costs more in pound value to buy something than it did when you bought the bond, then you're not getting the deal you thought you were. If the UK wants you to buy another bond in the future, it'll might have to offer higher interest rates to convince you it's a good deal.

So higher interest rates reflect a riskier investment, due to underperformance of an economy, which results in costlier borrowing. And the fact the country is underperforming means it's likely to be borrowing more, so it's a double whammy of more and more expensive borrowing. Just like how payday loan companies can charge eye-watering percentages on those with the least in society: Because they're riskier investments, and they're desperate.

Buying Your Own Debt

One final thing I've not talked about is why 1/3rd of UK debt is owed to the BoE, so essentially UK lending to itself.

This how money is created.

Say the govt has a hole in the budget and it needs to raise some money. The economy is shite, so no one wants UK bonds, and so the interest rates need to be really high for anyone to even consider it. But the government doesn't want to take on such a costly loan. So instead, it issues a bond and buys it from itself.

It costs the government nothing to do this, but this is the case I mentioned earlier, where you are diluting the value of the existing bond holder's investments. There's a certain amount of tolerance to this, and it's a stated aim for the BoE/govt that inflation will be 2%, so as long as you're not doing issueing and buying from yourself a crazy amount of bonds, this is seen as OK.

But if the number of bonds you issue and buy from yourself gets too high, this could cause inflation to increase too much, and the investors will start to lose confidence in the UK as a safe investment, and bond interest rates have to rise further.

 

[tommers]

Basically we owe most of it to ourselves. That's what I took away from it.

 

[Fez909]

Here's a question, what would be the consequences if Labour went on a similar borrow and spend splurge - what would be the consequences. How much borrowing is too high?

I didn't give an answer to this.

Basically, if you borrow more you have to use the money to increase GDP, or reduce spending (while maintaining GDP - 'efficiency'). If you do this, or can convince people you're doing this, then it's all gravy. It's like getting a mortgage or a business loan - you expect the amount you borrow will be less than the gain, so it's a Good Thing.

However, if you are borrowing and have no plan to increase GDP, then you're just digging yourself a bigger hole, so you're fucked.

Whether your borrowing is seen as a good thing or a bad thing comes down to politics and confidence, so there's no objective answer.

But I think most people would agree that borrowing to fund education, scientific and technological research and infrastructure would be Good Borrowing. Whereas if you are borrowing for unproductive policies, or to fund tax cuts, then this is Bad Barrowing, and you'll see something like what happened when the lettuce was in charge.

 

[redsquirrel]

Economics as a science has all the validity of horoscopes. Even economists don’t understand it.

This. I'd refer back to this old thread

It's not about wealth and how to raise living standards it's about how to justify wealth inequalities and contain living standards through the suggestion that there is a science called economics.

That;'s literally what all it is.

But if people do want an easyish example of economists think them I can recommend Ha-Joon Chang's Economics The User's Guide Pelican guide. It is an entertaining read from an economist who at least has some sight to the his philosophy's window. I suspect you can probably get a copy from your local library.

Even there though the there is an inability to see through the religion.
Sure you can attempt to estimate the GDP of pre-capitalist societies, but what does it mean to talk about the 'economic' productivity of societies when there was no economy?

 

[MickiQ]

I think I understand it, so will try to explain it patronisingly simple terms. I'm sure someone will correct my misunderstandings, and that'll help both of us (see Cunningham's Law).

Money isn't real.

It has no intrinsic value. It's just a tool to put value on goods, services and time, making trade easier.

The govt issues money so that citizens can trade and engage in economic activities.

Governent Spending

The government also needs money to trade (buy things, pay people, to provide public services etc). They get this money from taxes. Most of the time, taxes don't cover spending, so they have to borrow it.

Bonds

Issuing bonds is how the government borrows money. Bonds are like loans: the government promises to pay back the borrowed amount with interest at a later date.

The bonds pay interest, which is similar to dividends on shares. But unlike shares, they also have a maturity date, when the borrowed amount must be paid back. Also, bonds don't give you any control like a share would (voting rights, etc). It's purely financial.

Buyers

Anyone can buy these bonds, in theory, but it's mostly big corporations, and big banks, like HSBC and Citibank.

Interest

The interest on the bonds is based on the Bank of England interest rates.

So you might think they could set the interest rates really low to make borrowing cheap and cheat the system?

Well, they could. They can set them to anything they want. But the organisations that buy the bonds have no obligation to buy them.

Investments are always risk vs reward. You can 'risk' 2p on the penny falls, but you'll never win £1m. You might win £1 if you're very lucky, but the most you'll lose is 2p.

Likewise, if the risk is very high, the rewards have to be high, too, otherwise why would you bother? Imagine a penny falls machine, but each play cost you £10, and you still only won whatever two pence pieces came out. You wouldn't play.

So, if the interest rates are deemed to be low, based on how the country as a whole is doing, then why would you buy UK bonds?

Default Risk

If the country doesn't earn enough tax revenue to pay for services, then they sell bonds to get more money. But now you have to pay for the services provided AND the interest on the bonds.

This leaves you two options: Increase tax revenue or reduce services.

If you do neither, and you can't afford to pay the interest on the bonds, then that's a default.

So the interest rates on the bonds have to reflect a realistic view of the country's economy, based on its ability to pay back your investment+interest, from current or future tax revenues. Similar to shares again.

National Debt

This is what we call the total value of all bonds issued.

Money Supply

If you can magic up more money, as the BoE can, then in theory you could create enough to pay off all the bond holders and now you're debt free.

But this is a bit like seling a limited record for mega money, then pressing a load more once they've sold out. You'd piss off the people who bought the first pressing, as they paid more when it was rare, and now its value has depreciated.

They're unlikely to buy your bonds again in the future. So unless your tax revenue now covers your services 100%, you're fucked. So the bank doesn't do that, as it needs to sell more bonds in the future when the current ones mature.

Balancing Act

Actually, the Bank does print money all the time, and it does reduce the value of the bonds. And increases inflation, as there is more money circulating in the economy, but 'chasing' the same amount of goods.

Inflation

If it now costs more in pound value to buy something than it did when you bought the bond, then you're not getting the deal you thought you were. If the UK wants you to buy another bond in the future, it'll might have to offer higher interest rates to convince you it's a good deal.

So higher interest rates reflect a riskier investment, due to underperformance of an economy, which results in costlier borrowing. And the fact the country is underperforming means it's likely to be borrowing more, so it's a double whammy of more and more expensive borrowing. Just like how payday loan companies can charge eye-watering percentages on those with the least in society: Because they're riskier investments, and they're desperate.

Buying Your Own Debt

One final thing I've not talked about is why 1/3rd of UK debt is owed to the BoE, so essentially UK lending to itself.

This how money is created.

Say the govt has a hole in the budget and it needs to raise some money. The economy is shite, so no one wants UK bonds, and so the interest rates need to be really high for anyone to even consider it. But the government doesn't want to take on such a costly loan. So instead, it issues a bond and buys it from itself.

It costs the government nothing to do this, but this is the case I mentioned earlier, where you are diluting the value of the existing bond holder's investments. There's a certain amount of tolerance to this, and it's a stated aim for the BoE/govt that inflation will be 2%, so as long as you're not doing issueing and buying from yourself a crazy amount of bonds, this is seen as OK.

But if the number of bonds you issue and buy from yourself gets too high, this could cause inflation to increase too much, and the investors will start to lose confidence in the UK as a safe investment, and bond interest rates have to rise further.

When my evil and cunning plan to seize power comes to fruition and I am World Emperor you will be appointed as Head of the IMF

 

[smmudge]

This is probably the most straightforward and balanced article I've read to explain it

What about the National Debt? - Positive Money

This section is condensed from an appendix from our book Modernising Money. What is the national debt? The government has three main sources of revenue: Taxes &

positivemoney.org

 

[ska invita]

This is probably the most straightforward and balanced article I've read to explain it

What about the National Debt? - Positive Money

This section is condensed from an appendix from our book Modernising Money. What is the national debt? The government has three main sources of revenue: Taxes &

positivemoney.org

that is good, thank you.

On this
"Fourth, it is misleading to think of the national debt in the same way as we think about private debts. The major holders of the national debt are UK investors: mainly pension funds and insurance companies. Thus, it is in many senses a debt we owe to ourselves (albeit it one owed by current taxpayers to current holders of the debt, which can create an inter-generational transfer of wealth)."

...the intergenerational bit, thats taking the money of the next generation for todays generation, right? Its a debt the next generation are lumbered with yeah?

 

[ska invita]

its almost never reported in Britain how much the US borrows IME - its kind of fascinating, because the British right fantasise about the US system but utterly miss this part of it - maybe willful ignorance but more likely just ignorance

.

US DEBT TO GDP

and UK

 

[mojo pixy]

Sure you can attempt to estimate the GDP of pre-capitalist societies, but what does it mean to talk about the 'economic' productivity of societies when there was no economy?

How far back are we looking in this case? Because eg Rome (a pre-capitalist society) had an economy, in the broad sense of there was a money supply, there were taxes and fees for businesses and citizens, there was trade, borrowing and lending etc. So there was 'an economy', albeit not a capitalist one.

I'm not remotely interested in assessing what Rome's 'GDP' might have been (90%+ of it will have been made and owned by the emperor and aristocracy anyway), but it certainly had an economy of a sort, though the word may not have been invented yet.

 

[smmudge]

that is good, thank you.

On this
"Fourth, it is misleading to think of the national debt in the same way as we think about private debts. The major holders of the national debt are UK investors: mainly pension funds and insurance companies. Thus, it is in many senses a debt we owe to ourselves (albeit it one owed by current taxpayers to current holders of the debt, which can create an inter-generational transfer of wealth)."

...the intergenerational bit, thats taking the money of the next generation for todays generation, right? Its a debt the next generation are lumbered with yeah?

Yes, or rather transferring the wealth of today's working generation, who pay most of the income taxes, to the pensioner generation, who benefit from govt debt assets in their pension funds.

 

[ska invita]

Yes, or rather transferring the wealth of today's working generation, who pay most of the income taxes, to the pensioner generation, who benefit from govt debt assets in their pension funds.

sounds like another deliberate bribe to that voter age, along with permanent house price increases

 

[redsquirrel]

How far back are we looking in this case? Because eg Rome (a pre-capitalist society) had an economy, in the broad sense of there was a money supply, there were taxes and fees for businesses and citizens, there was trade, borrowing and lending etc. So there was 'an economy', albeit not a capitalist one.

I'm not remotely interested in assessing what Rome's 'GDP' might have been (90%+ of it will have been made and owned by the emperor and aristocracy anyway), but it certainly had an economy of a sort, though the word may not have been invented yet.

A money supply and markets don't equal an economy.

The defining feature of a capitalist economy is that the exploitation is economic rather than extra-economic. If there is no, or negligible, economic exploitation occurring what does it mean to say there is an "economy"?

As Idris2002 stated on the thread I linked

You could, but that's where the element of 'bourgeois ideology' creeps in. "Inside each of these Papua New Guinean hill people, a 19th Manchester mill owner is trying to get out".

It suits economists very well to magic up the idea of non-capitalist economies - but what are these? Do they have any use for class struggle?

 

[mojo pixy]

A money supply and markets don't equal an economy.

The defining feature of a capitalist economy is that the exploitation is economic rather than extra-economic. If there is no, or negligible, economic exploitation occurring what does it mean to say there is an "economy"?

As Idris2002 stated on the thread I linked

It suits economists very well to magic up the idea of non-capitalist economies - but what are these? Do they have any use for class struggle?

Surely 'an economy' is mainly the sum total of all the labour, production, trade, lending, borrowing, debt and wealth in a society? Rome had all that - and much of it was based on exploitation.

It might be a bit anachronistic to use the word 'economy' since that word is a relatively new coining, but Rome (as well as many other empires, city states and federations etc) did have all the things we lump together as 'an economy' even if the word itself didn't exist yet.

 

[redsquirrel]

Surely 'an economy' is mainly the sum total of all the labour, production, trade, lending, borrowing, debt and wealth in a society?

Is it? Or is that what it is sometimes presented as? I agree with butchersapron's definition of economics and so 'an economy' is the means of exploiting (economically rather than extra-economically) the working class.

Rome had all that - and much of it was based on exploitation.

But extra-economic exploitation. The Roman's had slavery - that is an exploitation based on force. There might have been some limited economic exploitation (I'm not an expert but my understanding this is a debated point), but the structure of society was based on extra-economic exploitation.

It might be a bit anachronistic to use the word 'economy' since that word is a relatively new coining, but Rome (as well as many other empires, city states and federations etc) did have all the things we lump together as 'an economy' even if the word itself didn't exist yet.

Well that is the point, by lumping these together into 'an economy' you are putting the Manchester mill owners inside Roman senators.

 

[redsquirrel]

Ellen Meiksins Wood is the tops here. There are much fuller discussions in her works but I've c&p'd some quotes that are relevant.

(I've said it many times before but the fact that she died, especially before she could complete the last book on political thought, was a huge loss to us).

Ellen Meiksins Wood - The Origin of Capitalism: A Longer View

“This is not to say that all historians who subscribe to such models have failed to acknowledge that capitalism represents a historic break or transformation of one kind or another. It is true that some have tended to find not just trade but a bit of capitalism itself almost everywhere, especially in Greek and Roman antiquity, always just waiting to be released from extraneous impediments. But even they have generally insisted on a major shift from the economic principles of feudalism to the new rationality of ‘commercial society’ or capitalism. People have often talked, for example, about the transition from a ‘natural’ economy to a money economy, or even from production for use to production for exchange. Yet if there is a major transformation in these historical accounts, it is not in the nature of trade and markets themselves. The change is rather in what happens to the forces and institutions – political, legal, cultural, and ideological, as well as technological – that have impeded the natural evolution of trade and the maturation of markets.If anything, in these models it is feudalism that represents the real historic rupture, interrupting the natural development of commercial society. The resumption of commercial development, beginning[…]”

Ellen Meiksins Wood - Citizens to Lords: A Social History of Western Political Thought from Antiquity to the Middle Ages

This type of relationship, and even patronage (such as would exist in Rome), was absent in democratic Athens. Its absence certainly had the effect of encouraging the enslavement of non-Greeks. But it is, again, important to keep in mind that the majority of Athenian citizens worked for a living, mainly as farmers or craftsmen, and that citizenship in Athens precluded a whole range of legally and politically dependent conditions which throughout history have compelled direct producers to forfeit surplus labour to their masters and rulers. This is not to say that the rich in Athens had no advantages over the poor – though the gap between rich and poor was very much narrower in Athens than in ancient Rome. The point is rather that the possession of political rights made an enormous difference, because it affected how, and even whether, the rich could exploit the poor.

Here lies the great difference between ancient and modern democracy. Today, there is a system of appropriation that does not depend on legal inequalities or the inequality of political rights. It is the system we call capitalism, a system in which appropriating and producing classes can be free and equal under the law, where the relation between them is supposed to be a contractual agreement between free and equal individuals, and where even universal suffrage is possible without fundamentally affecting the economic powers of capital. The power of exploitation in capitalism can coexist with liberal democracy, which would have been impossible in any system where exploitation depended on a monopoly of political rights. The reason this is possible is that capitalism has created new, purely economic compulsions: the propertylessness of workers – or, more precisely, their lack of property in the means of production, the means of labour itself – which compels them to sell their labour power in exchange for a wage simply in order to gain access to the means of labour and to obtain the means of subsistence; and also the compulsions of the market, which regulate the economy and enforce certain imperatives of competition and profit-maximization.

So, both capital and labour can have democratic rights in the political sphere without completely transforming the relation between them in a separate economic sphere. In fact, it is only in capitalism that there is a separate economic sphere, with its own imperatives, and so it is only in capitalism that democracy can be confined to a separate political domain. It is also only in capitalism that so much of human life has been put outside the reach of democratic accountability, regulated instead by market imperatives and the requirements of profit, the commodification that affects all aspects of life, not just in the workplace but everywhere. Citizenship today, in the conditions of capitalism, may be more inclusive, but it simply cannot mean as much to ordinary citizens as it meant to Athenian peasants and craftsmen – even in the more benign forms of capitalism which have moderated the effects of market imperatives. Athenian democracy had many great short comings, but in this respect, it went beyond our own.

 

[mojo pixy]

Is it? Or is that what it is sometimes presented as? I agree with butchersapron's definition of economics and so 'an economy' is the means of exploiting (economically rather than extra-economically) the working class.

I think in this case you're using 'economy' in the religious sense mentioned upthread tbh. For many if not most people, 'an economy' is simply an umbrella term for

the sum total of all the labour, production, trade, lending, borrowing, debt and wealth in a society

by lumping these together into 'an economy' you are putting the Manchester mill owners inside Roman senators.

I don't really understand what you mean. Roman senators were undoubtedly motivated by exactly the same power, greed and avarice as Manchester mill owners, and most people (slaves of course but to a large extent everyday citizens too) were subject to their decisions. I don't want to labour the comparison too hard, but their exploitation wasn't 'extra-economic' since in both cases the exploitation was integral to their own wealth and power accrual.

This type of relationship, and even patronage (such as would exist in Rome), was absent in democratic Athens. Its absence certainly had the effect of encouraging the enslavement of non-Greeks. But it is, again, important to keep in mind that the majority of Athenian citizens worked for a living, mainly as farmers or craftsmen, and that citizenship in Athens precluded a whole range of legally and politically dependent conditions which throughout history have compelled direct producers to forfeit surplus labour to their masters and rulers. This is not to say that the rich in Athens had no advantages over the poor – though the gap between rich and poor was very much narrower in Athens than in ancient Rome. The point is rather that the possession of political rights made an enormous difference, because it affected how, and even whether, the rich could exploit the poor.

Here lies the great difference between ancient and modern democracy. Today, there is a system of appropriation that does not depend on legal inequalities or the inequality of political rights. It is the system we call capitalism, a system in which appropriating and producing classes can be free and equal under the law, where the relation between them is supposed to be a contractual agreement between free and equal individuals, and where even universal suffrage is possible without fundamentally affecting the economic powers of capital. The power of exploitation in capitalism can coexist with liberal democracy, which would have been impossible in any system where exploitation depended on a monopoly of political rights. The reason this is possible is that capitalism has created new, purely economic compulsions: the propertylessness of workers – or, more precisely, their lack of property in the means of production, the means of labour itself – which compels them to sell their labour power in exchange for a wage simply in order to gain access to the means of labour and to obtain the means of subsistence; and also the compulsions of the market, which regulate the economy and enforce certain imperatives of competition and profit-maximization.

So, both capital and labour can have democratic rights in the political sphere without completely transforming the relation between them in a separate economic sphere. In fact, it is only in capitalism that there is a separate economic sphere, with its own imperatives, and so it is only in capitalism that democracy can be confined to a separate political domain. It is also only in capitalism that so much of human life has been put outside the reach of democratic accountability, regulated instead by market imperatives and the requirements of profit, the commodification that affects all aspects of life, not just in the workplace but everywhere. Citizenship today, in the conditions of capitalism, may be more inclusive, but it simply cannot mean as much to ordinary citizens as it meant to Athenian peasants and craftsmen – even in the more benign forms of capitalism which have moderated the effects of market imperatives. Athenian democracy had many great short comings, but in this respect, it went beyond our own

I don't really see how this means Rome didn't have an economy. Unless we are indeed using the word in its 'religious' or doctrinal sense.

 

[mojo pixy]

Anyway this is all off topic and I shan't go on. Apologies.

 

[redsquirrel]

I think in this case you're using 'economy' in the religious sense mentioned upthread tbh. For many if not most people, 'an economy' is simply an umbrella term for

That is what the economists would like to make it, and indeed have been somewhat successful in. But in what way is it useful to accept, build, this definition? We, or at least I, want to tear down economics - I want to assist in the creation of a society without economic exploitation (well preferably without any exploitation at all). Using the language and religion of those that seek to increase exploitation does not seem a useful path.

I don't really understand what you mean. Roman senators were undoubtedly motivated by exactly the same power, greed and avarice as Manchester mill owners, and most people (slaves of course but to a large extent everyday citizens too) were subject to their decisions. I don't want to labour the comparison too hard, but their exploitation wasn't 'extra-economic' since in both cases the exploitation was integral to their own wealth and power accrual.

I don't accept that at all.
In Rome the exploitation was (barring possibly a limited amount) extra-economic, it was based on force as under feudalism.
The defining feature of capitalism is that the exploitation is economic. Ellen Meiksins Wood again - The Origin of Capitalism: A Longer View

Only in capitalism is the dominant mode of appropriation based on the complete dispossession of direct producers, who (unlike chattel slaves) are legally free and whose surplus labour is appropriated by purely ‘economic’ means. Because direct producers in a fully developed capitalism are propertyless, and because their only access to the means of production, to the requirements of their own reproduction, even to the means of their own labour, is the sale of their labour-power in exchange for a wage, capitalists can appropriate the workers’ surplus labour without direct coercion.