Home
| Databases
| WorldLII
| Search
| Feedback
Edited Legal Collections Data |
Book Title: Research Handbook on Political Economy and Law
Editor(s): Mattei, Ugo; Haskell, D. John
Publisher: Edward Elgar Publishing
ISBN (hard cover): 9781781005347
Section: Chapter 10
Section Title: Debt and financial stability
Author(s): Toporowski, Jan
Number of pages: 7
Abstract/Description:
Debt derives its legal status from the notion that it is a voluntary contract. Such voluntary contracts characterize the financing arrangements of merchant capitalists. Involuntary debt is of much older provenance in traditional societies where the need for minimal consumption with inadequate income gives rise to debt bondage. With the development of industrial capitalism, and the associated emergence of a credit system, debt comes to be a permanent feature of the economy. Involuntary debt now appears as ‘enforced indebtedness’ due to counterpart saving behaviour among households and firms. In the work of Minsky, such debt is a characteristic of Ponzi financing arrangements: whereas balance sheet operations give rise to debt financing of assets (a form of voluntary indebtedness), Ponzi financing is characterized by debt without a counterpart asset. This can be due to ‘enforced indebtedness’, but it can also be due to speculation and balance sheet operations. Thus, debt becomes an ‘endogenous’ aspect of a credit economy – in other words, it is not subject to voluntary choice or decision. This is most apparent in the case of government financing in a credit economy, where tax revenue and expenditure are determined by the evolution of national income, or private sector economic activity and debt is the balancing item. Let us step back and think through the logistics of debt as a voluntary contract. A liability to pay debts is an obligation that arises from the law surrounding contracts, that is, agreements between legal persons.
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/journals/ELECD/2015/1315.html