Since the 1980s, the dominant ideology driving monetary and fiscal policies has held the debt market as the ultimate guarantor of social discipline. Monetary policy is there to teach the state to behave like a stern father, through its ability to influence the rate at which governments are able to seek financing. In Europe, this posited that the role of an independent central bank was to fight against inflation while curbing deficits and debt — leaning on figures such as the 3 percent deficit to GDP ceiling or the 60 percent debt-to-GDP ratio established in the 1992 Maastricht Treaty.

And then suddenly, all of this seemed to melt away. During the COVID-19 crisis, the European Central Bank [ECB] propped up governments by purchasing debt. This was essentially a replay of the post-2008 Eurozone crisis, which already saw an incremental and technocratic, but nonetheless paradigmatic, shift as central banks took to making large bond purchases on the open market. The Dutch economist Jan van’t Klooster has argued that monetary policy instruments and breaches in taboos like quantitative easing amount to a new “technocratic Keynesianism.” In any case, these were changes in the shadows — with no explicit political authority — that nonetheless saw the ECB, taking its cues from the US Federal Reserve, essentially ordering a break from the neoliberal order established in the 1990s.

In terms of monetary policy and fiscal room for maneuver, anything seemed possible during the pandemic. Even France’s finance minister, Bruno Le Maire, was being forced to take a position — if not directly on ideas like modern monetary theory then at least on fundamental questions like the monetization of deficits or ECB debt cancellation.

We’ve gone back to a world where the objective of monetary policy is to fight inflation and maintain the value of assets invested in public debt. There are some new developments, however. Last summer, the ECB issued a protocol clarifying that its debt market interventions would be conditioned on assessments by the European Commission of member state’s public finances.

This is very new. During the pandemic it was basically an open bar, with ECB nondiscrimination between Greek and German bonds, for example. One of the tools for returning to normal was to say “no, ECB debt purchases are conditional.” The European Parliament has also pushed the issue — now that the Maastricht criteria on debt levels are obsolete in a world with 100 or 120 percent debt-to-GDP ratios. These criteria have been relaxed a little, with a key indicator now being a member state’s fiscal trajectory and not just the deficit level itself. But any intervention by the European Central Bank [to buy a country’s bonds] is said to be conditional on its quasi-religious journey toward what are considered “sound and sustainable macroeconomic policies.”

As a sociologist, I investigate the beliefs of actors in the social world and how they perceive this reality. Throughout the market turmoil during the pandemic, what I saw in my discussions with people in this milieu — those in charge at the Banque de France or at the treasury office tasked with auctioning debt — was that they saw their actions as part of a certain continuity. For them, there was never any question of entering a new world. They used terms like the “normal” or the “abnormal,” a “parenthesis,” and the “exception” to explain their actions. I remember one figure from the French treasury office telling me that of course, after the pandemic, the old order would return, “what’s the alternative?”

I replied that the alternative was right in front of us: we could use the ECB safety net as a permanent means of protecting member states from the financial market deciding “what matters” and what the “fundamentals” for the economy and the society are. Throughout this period, there was an explicit operation in denial. In other words, authorities were denying the paradigmatic changes on display, the new instruments that provided an alternative to the market’s domination of state financing. They only ever saw this tool as a means to ensure financial stability — never as a lever for social or ecological transformation.

This is a clear extension of the “debt order.” It’s a form of arbitration that openly favors what Pierre Bourdieu called the “right hand” of the state at the expense of social services. European power structures have effectively carved out an exception for Germany, allowing military expenditures to be excluded from the deficit targets that are otherwise strictly monitored. But every increase in defense spending still has to be offset by cuts to the “left hand” of the state in public services and social spending. Once again, European budgets — what kinds of spending are considered legitimate — are a key battleground in the class struggle.

In the rearmament debate in France, we’re also seeing the reappearance of an old idea, one that dates back to the early twentieth century before the welfare state really took shape: that popular savings should be mobilized directly, without going through capital markets. In other words, the state would issue new debt, but instead of targeting the narrow bondholding class — i.e., the wealthiest strata who already concentrate most of the financial assets — it would draw on the savings of a broader segment of the population. Obviously, this broader mobilization isn’t about “inclusion” in any emancipatory sense. It’s about manufacturing a consensus: getting ordinary people to accept, even endorse, a new financial-military order that will inevitably go hand in hand with deeper sacrifices in terms of public services.

Debt is the currency of the broader financial system. It’s highly liquid and plays an equivalent role to cash. The strength of the dollar is both in the power of the actual “greenback” and in the desirability of “yellow” treasury bills. For Europe, the reference marker is German treasury bonds. Debt like this can be resold at any moment because there’s always a demand. The role of the European Central Bank is to uphold that function, i.e., the monetary role of debt [as the currency of financial markets]. When central bankers say they’re ready to do “whatever it takes,” that means preserving this role of collateral through injections of liquidity into the debt markets and preserving sovereign bonds as a safe asset for the financial markets.

But at the same time, ECB philosophy is that bonds should not be supposed safe but manufactured as safe by member-state austerity and policies that will ensure to markets that debt is safe. The central bank’s debt-buying powers are a very powerful tool for finance. But it’s widely viewed as a red line that their interventions should not be made with the intention of shoring up the welfare state, social safety nets, or to make ambitious investments in things like the ecological transition, education, and culture. The justification for central bank intervention is a battlefield that, for the time being, is dominated by finance.

[Karl] Marx was also already on to this. He described a class of rentiers as able to use loans as a prod to capital accumulation and a tool for governing political regimes, much as “shareholders” do for a private corporation. This class’s power rests on the security afforded to their debt by the coercive apparatus of the state (the police and justice system).

Take the example of the United States’ Whisky Rebellion in the 1790s. When the framers of the US constitution — who were themselves mostly bondholders — decided that the debt from the War of Independence would not be canceled, they levied a tax on whiskey, which provoked a popular revolt. It’s not just something from the distant past. The TVA sales tax is the French state’s main source of revenue today, despite it being an extremely unjust levy with no progressive differentiation in terms of income, and this tax is used to pay for the bondholding class’s incomes. Marx knew that budgeting and debt are a site of arbitration between social classes.

I describe all the legal coups, deliberately humiliating for sovereign states, which are part of a strategy orchestrated by financiers seeking to recover their debts. Each time, the aim is to use legal means to force sovereigns to pay their debts. This judicial power to take states to court and seize their assets is also a form of derisking of private financiers that originates in the US in the context of cold war and decolonization. Faced with nationalizations and expropriations in new sovereign states, American investors, hand in hand with US economic diplomacy, ensured that the alternatives [in designing new international laws] promoted by the countries of the Global South were defeated, and that New York law and financial order became the world standard for deals and disputes.

The rise of New York as a legal and financial center signaled, in many ways, a fragmentation of sovereign authority — the emergence of a quasi-sovereign enclave within the United States itself. This shift entailed a form of dispossession, particularly for the State Department, which had previously played a central role in politicizing decisions about whether to uphold sovereign immunity for debtor states. Before, foreign governments involved in disputes with US investors could turn to the State Department, appealing to shared geopolitical interests in support of immunity claims. Beginning in the 1970s, however, this discretionary, diplomatic function was curtailed and judicialized, transferred to the courts in the name of legal neutrality, and ultimately to better secure the sanctity of capital over political contingency and discretionary power.

From the beginning, there’s been friction between, on the one hand, defending the value of the dollar as a reserve currency for the world and the rights of creditors to use New York courts to sue sovereign actors and seize assets. Foreign central banks’ reserves are deposited at the New York Federal Reserve Bank [via the underwriting of US treasury bills, which facilitates the financing of the federal government]. Therefore, if too much power is granted to courts and creditors, and if the sovereign immunity of central banks begins to crack, foreign investors may grow wary of a legal environment increasingly used as a platform for asset seizures and aggressive enforcement. Radical legal assertiveness can ultimately undermine the dollar’s appeal as a safe global currency.

This reveals a structural tension within US power and its modes of hegemony. On one side lies the ambition to build a standardized legal order — a global model serving the interests of private creditors — which, to some extent, operates autonomously from executive authority and caters to a transnational financial enclave [largely anchored in the United States].

On the other side persists a drive to preserve discretionary, often arbitrary levers of action: unilateral sanctions or bilateral deals that bypass this legal infrastructure whenever the strategic interests of the American state demand it. The Trump administration appears poised to extend the reach of executive discretion, including through coercive measures aimed at defending the dollar’s value. Yet such assertiveness may corrode a key pillar of US hegemony: the perception of American law as a stable, predictable benchmark for the financiers of the world.

The Global South has long sought regional and collective alternatives to the hegemony of American law and finance. The developing world is divided between two imperial powers. Indeed, China itself is experiencing the same hegemonic dilemma: the desire to build a world reference standard with a transparency of rules, all while retaining sovereign arbitrariness. These two poles have brought international consultation mechanisms back into fashion, as alternatives to globalized law.

China’s rise to power has reinvigorated multilateral forums such as the Paris Club, which manages official debts on a state-to-state basis. Rendered obsolete by the dominance of private loans in emerging markets, this informal forum for discussion between official creditors played a decisive role in the restructuring of Zambia’s debt by establishing an ongoing dialogue with the Chinese creditor. Negotiations like this between state creditors have imposed themselves on the private sector and its laws. Nevertheless, state creditors and their financial departments remain under the influence of national financial sectors. This leaves little hope of a revolution in restructuring debt.

The idea from Streeck that I contend with is precisely the narrative behind this notion of “buying time,” which implies that debt authorizes the postponement of social conflicts and is not a trade-off, in the present, between social classes. But what Streeck says about how to schematize politics is very helpful: there are citizens who vote in elections, and then there are citizens who “vote” with their feet, by lending or not lending and coming or not to sovereign debt auctions. They are two means of political action.

My point is that sovereign debt and the current mode of financing is not a neutral technology. This market technology favors certain interests over others. As far as I’m concerned, the social trade-offs implied in debt have never been postponed. We’ve always made incremental social adjustments with this technology. In the early 2000s, for example, the Moody’s rating agency identified a default on social spending [and pensions] as necessary to avoid what was far more terrible to its eyes: a financial default. There is a set of social and political specifications for maintaining the liquidity and attractiveness of sovereign debts: in order to promote their assets, treasury departments are selling many promises to potential investors on the way present and future economic choices will be made.

Pessimism, I don’t know — perhaps it’s a realism in order to construct consistent alternatives. In any case, what has happened in monetary policy is nothing short of a silent revolution, one that began with quantitative easing and that was reinforced in the aftermath of the COVID crisis. There’s of course the temptation to assume that the system will self-destruct by virtue of its own contradictions and that crises can bring changes. Every time, however, I see the contradictions resolved by a further disciplining of society and public debate — a process that manages to readjust societal expectations to an order that demands yields and accumulation through debt.

Today you can see it with the shift of the French political debate around immigration, in which economic and social issues are completely invisible. Fascism is an extension, through updated political means, of accumulation in the capitalist system. There’s an institutional process to adjust expectations to the demands of capital, and that is ongoing.

I agree that the tax measures presented an element of political tact by Bayrou — and then you had the need to buy the consent of the Parti Socialiste. But what’s noteworthy about this budget is that we again see an arbitration between classes. In other words, all the spending cuts are to culture, education, and research — the “left hand” of the state. The only budget items that have been protected from cuts are on the “right hand” of the state: policing and the justice system.

The label I like to use to describe one kind of mood on the Left is “reassurance-ism.” Facing the general anxiety surrounding the state of public finances, heterodox economists want to downplay things and calm concerns. In other words, their objection is to consider that debt isn’t bad after all. From critical voices on the Left, we hear that this is all fake drama, alongside the claim that there’s an abundance of taxable savings. So, no problem. But this leaves out the fact that savings means inequality and the power of the bond market.

Of course, if debt is part of a system of redistribution and goes hand in hand with a general break with supply-side policies and the end of tax giveaways to companies, sovereign debt would be fine. Without that, however, savings are unequal and mean lower salaries for the majority and private indebtedness to allow many people to maintain their lifestyle. Under these conditions, debt is profoundly unfair and unequal.

The minimal consensus that existed among the Nouveau Front Populaire was over taxation. You could observe that financial regulation, getting the banking sector back under public control, perpetual debt, and central bank intervention all disappeared from the Nouveau Front Populaire’s [left-wing alliance’s] program. This was certainly necessary in order to build a coalition — but then the Left came off as somewhat naive on the debt question.

There has been a dramatic turnaround on the far right. Between 2012 and 2017, Le Pen lambasted the Maastricht system and claimed to stand for a kind of — however insincere — pro–public service platform. All of that has completely disappeared. In the lead-up to the snap elections last summer, many actors in the debt market expected [Le Pen’s] Rassemblement National to win a relative majority, and anticipated that the spread on French bonds relative to German bonds would be contained.

Why? Because in the meantime, the Rassemblement National had made a major pro-capital shift. You could call it the “Melonization” of Marine Le Pen [i.e., akin to Italian prime minister Giorgia Meloni], who now wants to prove her compatibility with the European technostructure. Above all, there’s a trend in French capitalism and finance toward a new libertarian mood that fits well with the far right, all while Le Pen has been able to win support from more dominant parts of capital.

What I describe in my first book, L’ordre de la dette, draws on the post–World War II alternative, which was not specific to France. It was a form of self-financing of the Treasury, with limited recourse to the market. Grouped around the state, you had public and quasi-public banks that had the obligation to deposit their cash at the Treasury. I think a hypothesis like this today would mean some form of People’s Bank to socialize state financing.

A closed banking circuit like this has become even more essential in a time of dwindling resources and with economic growth increasingly a thing of the past. This could well take place on a European scale, by starting from the already-existing strategic ambiguity on deficits from the EU and rejecting the political work of institutional denial of the alternatives to finance capital.