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 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 micro-level–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 post-colonial 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.
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 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 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 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, micro-debt–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.
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 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.
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?”
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.