Essay: Dealing with debt

The global justice movement of the 1990s and early 2000s focused on national debt. Its heirs should join forces with the nascent movements against micro-debt to present a challenge to the whole debt economy, argues George Caffentzis

August 10, 2014 · 14 min read

krauze-debtI want to start by distinguishing between two categories of debt, micro-debt and macro-debt, and defining the notion of a debt economy. Macro-debt is not only quantitatively large but it is collectively incurred in the name of a corporate entity such as a nation. National debt, for example, is collective because all citizens are responsible for its repayment, even if many individuals openly object to the state borrowing the money.

Micro‑debt, in contrast, comprises relatively small sums lent to individuals. In my definition, it includes what economic statisticians call ‘household debt’ as well as ‘micro-credit’ debt that is incurred when individuals borrow money to carry on ‘income-generating’ activities. We should bear in mind that although micro-debt comes in small packets, when summed over millions of separate debts it can add up to many billions of dollars. Thus, aggregate household debt in the US in 2010 reached about $13 trillion.

The movements that have been involved in resistance to micro-debt in recent years have been quite separate from those 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 and so on. With an energetic and inventive campaign, it forced the Mexican government to renegotiate the repayment terms of more than five million debtors. The Jubilee movement, in contrast, was largely directed against only one kind of debt – the odious, unjust and macro national debts of post-colonial states – and the conditions the World Bank and IMF imposed on the indebted nations’ governments in return for further loans and their continued participation in the international monetary system. It called for a ‘jubilee’ (the ancient Hebrew principle of the periodic cancellation of debts) in the global South.

Despite the efforts of both anti-macro and anti-micro debt movements, a debt economy has developed worldwide over the past three decades. By this I mean an economy that requires most workers to become indebted merely to reproduce their labour – in effect, an economy in which you are not only exploited, but you are expected to take out loans to be further exploited!

In the US and western Europe, workers began to be indebted to banks only in the post-second world war period – that is, at a time when real wages were rising and there was widespread guaranteed employment (for white men at least). The debt economy arose after the crisis of Keynesianism in the 1970s in a self-reinforcing cycle: with real wages falling and employment becoming increasingly precarious, the need to borrow simply to maintain living standards intensifies.

The problem of struggling against the debt economy is that micro- and macro-debts work together in this system to entrap people and effectively turn them into lifelong indentured workers for capital. In a debt economy, therefore, taking on one form of debt requires taking on all forms.

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 the early 1980s. High-level planners of the capitalist system saw in the ‘debt crisis’ – immediately caused by the worldwide leap in interest rates – a way to decisively counter the development and trade strategies then being pursued by the anti-colonial movement. A loose alliance of post-colonial governments had come together in the 1970s in support of a set of proposals called the New International Economic Order (NIEO). The national governments supporting the NIEO, which was adopted by the United Nations in 1974, argued that the formerly colonised nations should receive reparations from the colonial powers to compensate them for the centuries-long theft of their wealth, from mineral resources to labour power.

This discussion, along with the rest of the NIEO declarations, became academic when the debt trap was sprung in 1982. Far from receiving reparations, the former colonised peoples were required not only to 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 the World Bank and IMF. These representatives of their former masters oversaw ‘structural adjustment programmes’ (SAPs) that required cutting public services, privatising government assets, and ending restrictions on the flow of capital.

The mass response to this return to colonial status was a series of ‘IMF riots’. These explosions of debtors’ anger against payment of the unjustly accumulated national debt began in the mid-1980s in places such as the copper zone of Zambia and reached their peak with the insurrectional ‘Caracazo’ in Venezuela in 1989. The demonstrations could bring millions onto the streets because of the kind of debt that was in question, for national debt – unlike household debt – was owned by every citizen. The organisers of these anti-SAP protests could rely on the fact that everyone involved was a ‘national debtor’ and carried no burden of individual responsibility or blame. Instead of being a source of division, the national debt became, for a 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 take ‘ownership’ of the SAPs these financial institutions devised as conditions for receiving loans. This was their officials’ euphemistic response to the hatred expressed against them in countless thousands of banners and many dozens of languages. This lack of ‘ownership’ meant that the World Bank/IMF-devised SAPs could not discipline the resistance.

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, often in motion between countryside and city, evading roadblocks and border controls to preserve traditional common lands and creating new commons in the peripheries of the mega‑cities of Latin American, Africa and Asia. The immense value these workers created was dissipated and lost to the accumulation process the World Bank and the IMF were duty-bound to try to expand.

Economy of the poor

This world beyond SAPs’ reach was the research focus for many post-colonial anthropologists. They 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. Instead of spying on the politics of the bush and favela, it revealed their complex economic ways that made it possible for the poor to do the impossible and survive on ‘a dollar a day’.

The World Bank’s response to the resistance to SAPs was to expand the kinds of debt it was concerned with. It moved its focus from the macro-governmental and corporate level to 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 into the capitalist system, capture the value they produced and diminish their imagination for alternatives. The Bank began to shift its emphasis from the large infrastructure projects such as dams and highways that it started off financing in the 1950s and began to support micro-credit schemes patterned on Muhammad Yunus’s Grameen Bank, ‘microfinancing’ and ‘financial inclusion’.

When the World 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 don’t 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 with a new system of ‘financial inclusion’. In other words, they want to financialise social reproduction. They see a vast new area of financial expansion for capitalism and are now preaching a financialising version of Hernando De Soto’s project of attacking the commons of the so-called ‘poor’, in order to capitalise their land.

As a World Bank News and Broadcast column on ‘Microfinance and financial inclusion’ put it 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 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 to small and medium-sized business loans – has become a focus of the Bank’s attention.

This has become of particular importance in the context of austerity, shifting the burden of debt and the social reproduction of labour onto the individual, the family, the community and the working class as a whole. The widespread reduction in real wages and increased aggregate of micro-debt, alongside the national debt crisis followed by structural adjustment scenario imposed on the people of Greece, Spain, Portugal and Ireland, has brought the same sort of issues to the global North as were previously largely limited to the South. Across the globe, the World Bank and its visionaries now see that their terrain is not only the macro-level of SAPs, but the micro-level of monetary flow between workers and financial institutions. Together they create the debt economy.

Micro-debtors’ movement

It is time for those who identified with the struggle against national debt to take the same stand against micro-debt. An anti-micro debt movement began to develop in response to the financial crisis of 2008 in many countries. 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 defaulted.

I had the opportunity to witness one beginning of this movement in the Occupy protests throughout the US during autumn 2011. Although Occupy was not explicitly an anti-debt movement and it did not demand a jubilee (that is, the abolition of all debts), I noticed for the first time in my political experience that many of the protesters wrote statements such as ‘I owe $70,000 in student loan debt’ and ‘My medical debt is $5,000’ on their placards. Debt became a prominent topic in the talks and conversations in the tents of Occupy sites from Maine to California.

It was not surprising, then, that in the final days of the occupation of Zuccotti Park in New York some of the political energies of the Occupy movement were brought together and directed at student loan debt in particular. The organisational imperative of the Occupy Student Debt Campaign (OSDC) was to build towards a debt strike against student loans and to call for free public university education. This was centred upon a pledge: ‘I will stop paying off my student loan debt, if a million others will do the same.’ Given that 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.

It was not to be. After many months of campaigning only about 6,000 debtors signed the pledge, a tiny fraction of the number who had already defaulted and faced legal problems that would never arise from merely signing the OSDC petition. Why did this happen? Some of us in the campaign hypothesised that there was still much shame attached to publicly declaring oneself to be 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 it was something you would face 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, a new organisation, Strike Debt (, was launched. It took on two immediate projects. One was the research, writing and widespread distribution of a 122-page booklet The Debt Resistors’ Operations Manual surveying all the different circles of the hell of debt, from ‘credit reporting agencies’, to medical debt, debt collection agencies and ‘fringe finance’. The second was what we called the Rolling Jubilee.

Buying out debt

The Rolling Jubilee is an ingenious political use of the secondary market for defaulted loans that aims to turn financial capital’s tools against itself.

It works in the following way. When a loan is in default, the bank that offered it is often willing to sell it on a secondary market. Most often, a ‘bottom feeder’ collection agency is able to buy the loan at a greatly reduced price (2 to 5 cents to 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 organisation buy these loans on the secondary market and then cancel them instead of trying to collect on them? After consultation with tax lawyers, collection agency insiders and others, Strike Debt decided to do just that with Rolling Jubilee in the autumn of 2012.

The first step was to buy and cancel $5,000 worth of medical debt. After a telethon in November 2012, Rolling Jubilee received more than $500,000 in donations (including from many donors who were debtors themselves) to buy back and liberate randomly chosen debtors from their medical debt. In total, the project has now bought and cancelled more than $12 million dollars of medical debts incurred by more than 2,000 people, with more to come.

The idea behind both the Rolling Jubilee and the Debt Resistors’ Operations Manual is to attack the shame and fear that holds back millions from going beyond the invisible default on particular loans to open refusal of the whole debt economy. The manual aims 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 Rolling Jubilee does not change any fundamental structures of financial capitalism. For a start, we must first buy the debt before cancelling it. But it 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 helps to delegitimise the whole financial industry, from the ‘too big to fail’ banks to the shadiest payday loan outfit, for it poses the question: ‘What is the real value of my debt?’

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 seeking to dismantle it.

George Caffentzis’ latest book is In Letters of Blood and Fire: work, machines, and the crisis of capitalism (PM Press). Illustration by Andrzej Krauze

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