Against the Debt Economy
By
George Caffentzis
(In press, Red Pepper, Feb.-March 2014 issue)
Only debtors can free debtors from their debt.
-Patterned on Berthold Brecht’s poem, All or Nothing
Introduction. “Macro” and “Micro” Debt
I start with my conclusion:
The Global Justice movement of the 1990s and early 2000s focused
on national debt. It is time that its heirs join forces with the
nascent movements struggling against micro-debt that developed
after the crash of 2008 in order to present a challenge to the whole
debt economy.
To make my argument for this political conclusion I
distinguish two categories of debt--micro-debt and macro-debt-and define the notion of a debt economy.
Macro-debt is not only quantitatively large (measured at least
in the millions, if not the billions of dollars), but it is collectively
incurred in the name of a corporate entity like a nation. National
debt, for example, is collective since it is a debt a nation state’s
government takes on that automatically commits all its citizens to
be responsible for paying the loan off, even if many individual
citizens openly object to the state borrowing the money.
Micro-debt is quantitatively small (measured in the hundreds
or thousands of dollars) and is lent to individuals; in my definition,
“micro” debt includes what the economic statisticians call
“household debt” as well as “micro-credit” debt that is incurred
when individuals lend money to carry on “income-generating”
activities. We should remember that though micro-debt comes in
small packets, when summed over millions of separate debts it can
1
go into the trillions of dollars. Thus, household debt in the US in
2010 was in aggregate about 13 trillion dollars!
For the last few decades the movements that have been
involved in resistance to micro-debt have been quite separate from
movements resisting national debt. Consider the difference, for
example, between two of the most important anti-debt movements
in the 1990s: the El BarzÓn Movement in Mexico and the global
Jubilee movement.
El BarzÓn took on the multiplicity of debts at the microlevel--consumer debt, housing debt, small business debt, small
farmer debt. With an energetic and inventive campaign, it forced
the Mexican government to renegotiate with more than five million
debtors the terms of their debt to their benefit.
The Jubilee movement was largely directed against only one
kind of debt--the odious, unjust, and macro national debts of postcolonial states--and the conditionalities the World Bank and IMF
imposed on the indebted nations’ governments to receive further
loans to continue paying their national debt and prevent them from
being expelled from the international credit system. It called for a
“Jubilee” (the ancient Hebrew name for the periodic cancellation
of debts) in the global south.
Though anti-macro debt and anti-micro debt movements have
largely operated separately recently, a debt economy has grown
exponentially throughout the planet in the last thirty year. By a
“debt economy” I mean one that requires most workers to become
indebted merely to be reproduced. Indeed, it is a demonic economy
where you are not only exploited, but you are expected to take out
loans to be further exploited! In the US workers began to be in
debt to banks only since the rise of Keynesianism in the post
WWII period, i.e., in a time when real wages were rising and there
was widespread guaranteed employment (for white men at least).
The debt economy arises after the crisis of Keynesianism in the
1970s with a demonic mix: when real wages are falling and
employment becomes precarious while the need to borrow to
reproduce one’s self and community persists, even intensifies.
2
The problem of struggling against the debt economy is that
micro- and macro-debts work together in this system to entrap and
turn ultimately billions into life-long indentured workers for
capital. In a debt economy, therefore, to take on one form of debt
requires taking on all.
The World Bank: from “Macro” to “Micro” Debt
To establish the premise that micro- and macro-debt are
interlinked in a debt economy I begin the story of debt in 1982
when the high-level planners of the capitalist system saw in the
“debt crisis” --immediately caused by the worldwide leap in the
interest rates--a way to decisively counter the next steps of the
anti-colonial movement. A most salient step at the time was the
formation of a loose alliance of post-colonial governments in
support of what was called the New International Economic Order
(NIEO) in the 1970s. The national governments supporting the
NIEO argued that the formerly colonized nations deserved
reparations from the colonial powers to compensate them for the
centuries-long theft of their wealth, from mineral resources to labor
power.
This discussion became academic when the debt trap was
sprung in 1982. It squelched the NIEO and instead of receiving
reparations for the scandal of colonialism demanded in the NIEO
declarations, the former colonized peoples were required to not
only pay the principal and interest on loans borrowed from the
former colonial masters’ banks and governments, but to put their
economies under the direct supervision of officers of the World
Bank and IMF—the representatives of their former masters—who
oversaw Structural Adjustment Programs (SAPs) that required
cutting governmental subsidies for working class reproduction,
privatizing all government assets, and ending all restrictions on the
flow of capital.
The mass response to this return to colonial status was a
series of “IMF riots” (which were explosions of debtors’ anger
3
against payment of the unjustly accumulated national debt) that
began in the mid-1980s in places like the copper zone of Zambia
and reached their peak with the insurrectional “caracazo” of
Venezuela in 1989. The anti-debt demonstrations that brought
millions into the street could take place because of the kind of debt
that was in question. For national debt (unlike household debt) was
owned by every citizen. The organizers of these anti-SAP
demonstrations could rely on the fact that everyone involved was a
“national debtor” and national debt was not a debt that one was
personally shamed of. One could justifiably and openly hate it. In
fact, instead of being the source of division, the national debt
became, for a period of time, a source of unity.
The riotous resistance to paying national debt was often
beaten down violently, but the resentment pervaded everyday life.
The World Bank and IMF complained that the “poor” people of
the indebted countries did not claim “ownership” of the SAPs these
financial institutions devised as conditionalities for receiving loans
to pay down the national debt. This was the WB/IMF officials’
euphemistic response to the hatred expressed against them in the
millions of banners scrawled in dozens of languages saying again
and again: “The WB and IMF are the death pill for Nigerians, for
Mexicans, for Egyptians, for....”
This lack of “ownership” really meant, however, that the
WB/IMF-devised SAPs could not discipline the “poor’s”
resistance. For the “urban poor” could not be frightened by the loss
of a job and a steady wage, since they never had either. The “rural
poor” could not be easily expropriated to pay the debt because the
land they used was largely for subsistence crops and was held in
common, either communally or familially, without a title. The
“poor” were, at the same time, perpetually in motion between city
and countryside, continually evading roadblocks and border
controls to preserve traditional common lands and to create new
commons in the peripheries of the mega-cities of Latin American,
Africa and Asia. The immense value these workers created with
4
their work was dissipated and lost to the accumulation process the
WB and the IMF were duty-bound to try to expand.
This world beyond SAPs’ reach was the research area for
many post-colonial anthropologists who no longer traced kinship
systems, but studied the nodes and structures of “informal
economies” as well as the different shaming practices used
throughout the “under-developed” world against debtors defaulting
on loans from friends and/or family. Anthropology again became
useful to the expansion of capitalist relations. But instead of spying
on the politics of the bush and favela, as many did in the Cold War,
they revealed the complex ways of the economics of the bush and
favela that made it possible for the poor to do the impossible:
survive on a “dollar a day.” This was the “dark matter” of the
economic world and the World Bank wanted to penetrate it.
The World Bank’s response to the resistance to and evasion
of SAPs was to expand the kinds of debt it was concerned with. It
moved from concentrating on the macro-governmental and
corporate level down into the micro-level of social relations to
hook the peoples of the “adjusted” countries into micro-credit and
other monetary relations that would tie them up personally into the
capitalist system, capture the value they produce and diminish their
imagination for alternatives, so they could not even dream of
another world, much less realize it! The World Bank leaped over
the large capitalist infrastructure projects (like dams and highways)
that it started off financing in the 1950s and began to support
“micro-credit” schemes patterned on Muhammad Yunus’ Grameen
Bank and then went on to support “microfinancing” and “financial
inclusion.” In the 2000s, the “micro” becomes the new target of the
Bank’s thought and the elusive poor become the obscure objects of
the Bank’s desire.
When the Bank asks, “What keeps the poor poor?,” its
current answer verges on the tautological: the poor are poor
because they have no money...and so they did not know how to use
it when they borrow it. This is not true, of course, since “the poor”
in intact communal societies have invented many means for those
5
in need to access the common wealth (from the gift circuit to the
tontine). The World Bankers want to replace these “informal”
systems studied by anthropologists with a new system of “financial
inclusion,” i.e., to financialize social reproduction. They see a vast
new area of financial expansion for capitalism and are now
preaching a financializing version of Hernando De Soto’s project
of attacking the commons of the so-called “poor” in order to
capitalize their land.
As stated in a World Bank News and Broadcast column,
“Microfinance and Financial Inclusion,” in 2013: “With 2.5 billion
adults lacking access to financial services, improving access to
finance affords many development opportunities.” The Bank sees
in these 2.5 billion (a third of humanity!) a potential army of new
candidates for “financial inclusion” so that it can prepare for the
deeper penetration of capitalist relations into the areas of everyday
life where there is a huge field of value creation inefficiently
“captured” by the present capitalist system. Increasingly, microdebt--from household loans to micro-, small- and medium sized
business loans--has become a focus of the Bank’s attention. This is
because the state and the capitalist class claim that austerity is
necessary to escape defaulting on the national debt where
“austerity” means their refusal to cede part of the surplus value
they expropriated to the reproduction of the working class.
Therefore, the burden of social reproduction of labor power shifts
to the individual, the family, the community and the working class
as a whole. This refusal of the state to be the prime investor in
social reproduction has led to a reduction of wages and an
increased aggregate of micro-debt just to keep alive in the global
south and in the global north as well, given the recent application
of the national-debt-crisis followed by structural-adjustment
scenario on to the people of Greece, Spain, Portugal and Ireland.
The Bank and its visionaries now see that their terrain is not only
the macro-level of SAPs, but it is also the micro-level of monetary
flow between worker and financial institution. Together they create
the debt economy.
6
Towards a movement against the debt economy
It is time that those who identified with the struggle against
national debt take this step into the micro as well, especially
because there is an anti-micro debt movement that began to
develop in response to the financial crisis of 2008 and beyond, in
many countries including the US. The root experience behind this
movement was the asymmetry between the fates of large (“too big
to fail”) capitalist corporations and the average (“too small to
save”) worker especially in the US. The corporations received
trillions of dollars from the government to keep them alive while
seven million homes were foreclosed and seven million student
loan debtors have defaulted.
I had the opportunity to witness one beginning of this
movement in the Occupy! sites throughout the US during the Fall
of 2011. Occupy! was the first organized protest against debt’s
class-based fate in the crisis of 2008. Although it was not explicitly
an anti-debt movement and it did not demand a Jubilee (i.e., the
abolition of all debts), I noticed for the first time in my political
experience that the occupiers wrote many statements like “I owe
$70,000 in student loan debt” and “My medical debt is $5,000” on
their placards. Also, debt became a prominent topic in the talks and
conversations in the tents of many other Occupy! sites I had the
good fortune to visit from Maine to California. Not surprisingly
then in the final days of the occupation of Zuccotti Park in NYC an
organization appeared that gathered together some of the political
energies of the Occupy! movement and directed them at student
loan debt in particular: the Occupy Student Debt Campaign
(OSDC). The organizing imperative of the campaign was to build
toward a debt strike against student loans and to call for free public
university education. The OSDC formalized the energies of
Occupy! into a pledge: “I will stop paying off my student loan
debt, if a million others will do the same.” Given the fact that
already there were about seven million student loan debt
7
defaulters, there was hope that this conditional pledge would be the
foundation of a massive, visible and radical student loan debtors’
movement.
This was not to be. After many months of campaigning only
about 6000 debtors signed the pledge, even though there were
millions of “invisible” others who had defaulted on their student
loan debts already and legally faced problems from their defaulting
that they never would from merely signing the OSDC petition.
Why did this happen? Some of us in the campaign hypothesized
that there was still much shame in publically declaring that one
was a debtor, especially among those who could not keep up their
payments. There was also much fear that openly revealing one’s
status as a debt defaulter would lead to repressive consequences,
since one faced it alone.
This situation posed the problem of how the “invisible” mass
of debtors could transform themselves into “visible” agents openly
refusing the debt economy as a whole. After much discussion
among people in or close to the OSDC in the summer of 2012, a
new organization was launched that aimed to bring about this this
self-transformation of the invisible to the visible. This organization
is called “Strike Debt” (SD) (www.strikedebt.org). The two
projects that SD immediately took up were: (1) the research,
writing and widespread distribution of a 122-page booklet, “The
Debt Resistors’ Operations Manual” (DROM) that surveyed all the
different circles of the Hell of Debt, from “credit reporting
agencies,” to medical debt, to debt collection agencies, to “fringe
finance” and (2) what we called the Rolling Jubilee (RJ).
The RJ is an ingenious political use of the secondary market
for defaulted loans that turns financial capital’s tools against itself.
It works in the following way. When a loan is in default, the bank
that offered the loan is often willing to sell it on a secondary
market for just pennies on the dollar. Most often a “bottom feeder”
collection agency is willing to buy the loan at a greatly reduced
price (2 to 5 cents on the dollar) and use all the tricks at its disposal
to squeeze as much out of the defaulter as possible.
8
Why couldn’t a politically motivated anti-debt organization
like SD buy these loans on the secondary market at the same
pennies-on-the-dollar price that collection agencies pay as well and
then cancel them instead of trying to collect on them? We
discovered that we could! After consultation with tax lawyers,
collection agency “traitors,” and other knowledgeable folk, SD
decided to go ahead to found an organization that would buy debt
and cancel it. It was called the “RJ” and it started to roll in the Fall
2012. The first step was to buy and cancel $5000 worth of medical
debt. After a telethon in Nov. 2012, the RJ received more than
$500,000 in donations (from many who were undoubtedly debtors
themselves) to buy back and liberate randomly chosen debtors
from their medical debt. Here indeed is the realization of the
Brechtian wisdom in the epigraph, “only debtors can free debtors
from their debts.” In all, by now, the RJ has bought and canceled
more than $12 million dollars in the medical debt of more than two
thousand people and there is more to come.
The idea behind both DROM and RJ is to attack both the
shame and fear that holds back millions from the invisible default
on particular loans to open refusal of the whole debt economy. The
DROM is to provide debt resistors with the knowledge of the debt
terrain they are traversing and to reassure them that they do not
journey alone without map and compass.
Some might object that the RJ does not change any
fundamental structures of financial capitalism. For example, the RJ
must first buy the debt before cancelling it. It is not as if debt is
cancelled tout court as in a debt Jubilee. But the RJ is neither
intended to be a direct strategy to “bring down” the financial
system nor is it a subtle “magic bullet” that can subvert Wall
Street and trick the tricksters to their doom. It demonstrates to
debtors, however, that with solidarity they can be liberated from
their debt and it de-legitimates the whole financial “industry,” from
the “too big to fail” banks to the shadiest payday loan outfit, for it
poses the traumatic question, “What is the real value of my debt?”
9
In conclusion, debtors’ movements are forming to confront
the growth of a “debt economy.” It is now time to bring together
the movements against “macro” debt with those against “micro”
debt.. The World Bank saw the value of the “micro” in promoting
the debt economy years ago, so should we who are busy
dismantling it.
10