The bitter necessity of debt relief
Wednesday, Dec 26, 2012, 09:28 PM | Source: The Conversation
Debt, it seems, is an idea with currency. Cities, states, nations and individuals are indebted, with creditors at the door, demanding repayment. This year, the US Federal Reserve even had David Graeber — a prominent anarchist, anthropologist and Occupy Wall Street participant — in their offices to discuss debt. Graeber’s book Debt: The First Five Thousand Years has become a totem of the moment, a symbol of concern with debt’s overbearing presence in our lives.
The US Occupy movement has recently launched its Rolling Jubilee. The Jubilee combines Occupy’s populist élan with teachings from Graeber’s fascinating albeit misguided book. Appealing to religious conceptions of the jubilee (a year which wipes clean debts and releases slaves) and a parochial American tradition of “abolition,” the Rolling Jubilee will buy up debt for roughly 5 cents on the dollar and abolish the debt. One of the aims of the project is to draw attention to debt’s secondary and tertiary collection markets.
When debt goes bad and creditors no longer expect repayment, the debt is sold to collectors who make every effort to recoup the money. So a bank may sell credit card debt for 2 or 3 cents per dollar. Via dubious and often illegal tactics of harassment and threats, the debt collector may hope to double their money by squeezing out 5 cents on the dollar from the debtor. Rolling Jubilee wants to step in as a benevolent collector, pronouncing debt dead and freeing debtors from obligations.
At the beginning of this week, Rolling Jubilee had enough donations to abolish $8.5 million of US private debt. By any measure, this is a tiny percentage of total US debt. The Rolling Jubilee applied the first parcel of debt abolition to medical debts. Reactions to this action are mixed, albeit with sympathy and criticism coming from unexpected quarters.
There are two Occupy actions feeding into this campaign. One set of ideas comes from foreclosure activists who work to educate and inform foreclosed mortgagees on how to fight banks. Perhaps the stronger force in the move to Occupy debt collection originated with the Strike Debt campaign, an energetic and productive subgroup that is attempting to bring about a broad strike in debt repayments.
Strike Debt published the Debt Resistors’ Operations Manual, an educative publication about resisting what the group sees as the pernicious creep of debt into the lives of most US citizens. Reflecting this, the Strike Debt organisers seek with their Jubilee to bring the question of debt into debate, as its other actions and projects have also done.
Indeed, Rolling Jubilee presents a strong set of numbers to argue its case for calling a halt to individual indebtedness. 77.5% of American households are in debt, organisers claim. 62% of all bankruptcies are caused by a medical illness; tuition (tertiary education) debt is $1,000,000,000,000 and is second only to mortgage debt in size, with around half of recent graduates in default; 1 in every 7 Americans is being pursued by a debt collection; the ratio of household debt to income is 154%; 40% of indebted households have used credit cards to pay for basic living expenses. With such large numbers — although some of them are disputed and a percentage of households may be overrepresented — debt connects many citizens, even as it is typically seen as a private and individual concern. In other words, Rolling Jubilee wants debtors to see themselves as the 99%, with creditors as the 1%.
Let’s consider how debt came to be central to the US economy. In part, this is due to the persistence of an anachronistic “good life” fantasy that can no longer be sustained, at least not without greater levels of debt. For example, homeownership — that central plank of the American Dream — was greatly extended after the Depression and WWII, with regulation and reform addressing earlier barriers to ordinary working people taking on mortgages. This expansion of mortgages relied on stable work and rising household incomes, secured by the union movement and agreed to by a ruling and business elite anxious about the threat of communism and organised labour. As in Australia, inflation in US housing prices became a kind of national sport.
As communism began to tank, finance moved from the margins to the centre of the economy. Simultaneously, the union movement lost power as the ruling and business elite lost their fear of a present communist danger: income began stagnating, as the recent State of Working America report makes clear; inequality has risen in the US and other western nations since this turnaround; increases in cost of living, with the result that wages have not kept pace with ordinary, basic expenses; plus a shift to individual contracts accompanies a financialisation of firms, as shareholders and financial institutions decide on and prescribe salary levels, organisation of labour, productivity and forms of valorisation.
The logic of finance has entered the management of companies and the public sector. The emphasis on “just in time” production arrangements holds sway over all firms, where the aim is to maintain a “lean” employee pool. Consequently, the increase in precarious, casual and seasonal work means many people endure periods of uncertain income and existential insecurity.
Notice the types of debt named by the Rolling Jubilee as their prime targets: education loans, medical loans and credit card debt. There does not seem to be anything profligate — if that is the implication of the righteous, often sadistic morality of “paying one’s debts” — about these expenses. Instead, privatisation have driven up the cost of education and healthcare. One way of describing the shift over recent decades is from a system of social insurance and national debt to one of personal care and individual indebtedness. The marketisation of general and basic services such as medicine and education open them up to pervasive indebtedness, as the American example makes clear.
So the mid-century social democratic welfare state is wilting, but the fundamental fantasies it nourished remain in place: a place to live, a job, a future, a holiday. Debt comes to be a way of securing a disappearing future, a promissory good life. Stagnant wages effectively fall behind the inflation in the price of consumer goods; private insurance replaces public risk-sharing. The morality of personal debt — “these people just couldn’t wait for their TV” or “they bought a family home when they couldn’t afford it” — overlooks these causes of debt’s increase. Debt steps into wageless periods as an answer to the question of how to live with these forms of employment. Credit is the solution to a global problem caused by capital’s voracious appetite and new modes of production.
The unfolding crisis has to do with a contradiction between advertising’s persistent good life injunctions (“you deserve everything without exception”) and the media-cum-political discourse of austerity (“you’ve lived beyond your means”). An asceticism of work and debt clashes with a hedonistic ethic of mass consumption.
Politics and economy
The Debt Jubilee may be one step toward a repoliticiasation of the economy. Politicians today claim they are not following a certain economic ideology, but that they are simply implementing “what works”. An “administrative” and “managerial” technocratic approach to the economy reigns, with the sense of administering social affairs with no grand ethos or commitments beyond that of “the market”. Governments govern in the mode of not governing. (I will say more about this in a follow-up article for The Conversation in coming days.)
Against this, Rolling Jubilee and Strike Debt draw economic arrangements into view, perhaps opening onto the question of whether we can re-organise our economies away from debt and the high price of education, healthcare and everyday goods. The catchy concepts of the Jubilee wants to say that the economy is in the realm of the political; it is an area of dispute, where various significant alternatives are in dispute, despite what our day-to-day media and political discussions suggest.
Entrée or endpoint?
This raises crucial questions for the Rolling Jubilee. If, hypothetically, all debt was abolished, and yet contemporary capitalism is now reliant on privatised insurance and debt throughout the economy, would not the institutions and actors within them simply generate new debts? Also, debt is one hugely important part of how capitalism functions, but there are other parts too — those stagnant wages or the origins of private wealth in the poorly compensated labour of others. Debt may be a symptom rather than a cause.
Given the import of debt-credit to capitalism today, this raises the spectre of systemic collapse. Nevertheless, states and banks — increasingly arrayed on the same side — have more resources to out-wait the most obstinate and recalcitrant debtors, even if they are internationally organised. Hence the question becomes, is Rolling Jubilee an entrée or an endpoint? Can their gifts — parcels of anonymous debt repayment — address a systemic problem?
Another way of approaching this — is this a symbolic or a real action? Although the question falsely presupposes it cannot be both, the emphasis in Rolling Jubilee’s explanations lies in the symbolic function of these actions; the debt abolition draws attention to the fact that some debts are dismissed on the cheap anyway (i.e. 5 cents on the dollar), hence debt is not as crucial as morality of “paying one’s debts” may suggest.
Their hope here is to draw debt into open discussion — and maybe ask questions about why it is that US healthcare is so expensive and financially dangerous, why education is so expensive, why homeownership is so central to the national ethos, and so on. The signs are not good on these discussions opening up, as feelgood mainstream coverage has focussed on the mechanism of debt abolition without asking more probing questions about debt and social services. Meanwhile, real action may also be questionable, as banks no longer care about debt on secondary markets and the relieved debtor will mostly experience the debt relief as charity or a deus ex machina pardon.
The author acknowledges an exchange with Dr Michael Beggs, Department of Political Economy at University of Sydney, aided the writing of this piece. Nevertheless, all analysis is the author’s own.
Ben Gook does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.