In the wake of the global financial crisis, most of the discussion has been focused on questions of debt. And the response, almost uniformly, has been austerity and privatization: cuts to services that have been painted as forms of reckless spending by a bloated public sector. In Debt or Democracy, Mary Mellor turns the whole conversation upside down, showing that the important question is not who owes what, but who controls the creation and circulation of money in the first place. When the problem is examined from that angle, it becomes clear that privatization, far from being the answer to our problem, is the very source of it—the subordination of public finance to private interest.
 
A direct challenge to conventional economic thinking, Debt or Democracy offers a bracing new analysis of our economic crisis and offers cogent, radical alternatives to create a more just and sustainable economic future.

Public debt has become a severe problem for a great many economies. While the effects of tax policies on the allocation of resources are readily derived, the mechanisms that make public deficits and debt influence the economy are not so easily understood. This book elaborates on the effects of public debt starting from the intertemporal budget constraint of the government. It is shown under which conditions a government can stick to the intertemporal budget constraint and then, demonstrated how public debt affects the growth process and welfare in market economies. The effects are derived for models with complete labor markets as well as taking into account labor market imperfections. The focus in this book is on fiscal policy issues, but it also deals with monetary policy aspects. The theoretical analysis is complemented with empirical time series analyses on debt sustainability and with panel studies dealing with the relationship between public debt and economic growth.