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Debt became one of the primary concerns of populist movements emerging in the wake of the 2008 financial crisis. In America, both Occupy Wall Street and the Tea Party demonstrate an ever growing fascination with debt as the central ground of political contest, perhaps displayed most by the genesis of the Strike Debt/Rolling Jubilee initiatives. This is not a novel development – the contemporary struggle reflects a history of ‘class conflict’ basely rooted in the relationship between creditors and debtors that long predates modern capitalist institutions. The cyclical recurrence of this power struggle begs the question: Why does debt exist?

Let’s start with a brief history of this intractable question. ‘Debt,’ in a loose sense, can mean nearly anything given a particular social context. For example, members of an Iroquois village would generally give necessities like food, clothing, and weapons to one another with the implicit assumption that members of the village would always help one another if necessary. In 16th century England small villages operated largely on local systems of micro-credit, with each member generally allowing other trusted members to take what they needed (i.e. nails, leather, wood, beef, bread, etc.) in exchange for taking a small token (i.e. a leather strip) as promise of repayment. In each case these obligations could be exchanged and transferred throughout the community as necessary. Generally, a debt is an expectation of some behavior in exchange for a favor. In this sense the earliest examples of ‘debt’ were a sort of communal mutualism – the principle of reciprocity allowed for a relatively harmonious exchange of goods and favors within kinship groups. This is the sort of behavior one still sees among families, friends, and informal networks of exchange.

[Note: Many of the historical examples in this piece are taken from David Graeber’s “Debt: The First 5,000 Years.” An excellent discussion of the book can be found here: Mike Beggs offers a critique of “Debt,” to which Josh Mason replies here.]

How does a social concept like reciprocity transform into the modern notion of credit? Bluntly, through the exercise of power and social control in in-egalitarian societies. This is not to say that coercion was unknown or impossible before social stratification. But a person could hardly accrue massive debts before the establishment of land and goods as real property and the development of intra-communal hierarchical markets. In the agricultural temple-complexes of the Fertile Crescent the now recognizable notions of debt and credit co-evolved with the emergence of real socioeconomic distinctions in power relations. Getting access to social goods and capital – in the form of land, produce, finished products, and wedding-related expenses – could now require one to borrow from someone with access to large amounts of this capital.

Let’s not mistake this historical fable for a sort of quaint naturalism. Social relationships do not ‘naturally’ or ‘necessarily’ form – they are constructed by humans who nonetheless are often totally unaware of the ultimate consequences of their actions. The rise of stratified society, and therefore institutionalized debt and credit, was the product of a series of historical contingencies. Values assigned to land, goods, and people – the institutions we now refer to as “capital” – are inherently arbitrary. Values, now known as “prices,” reflect first and foremost the prejudices and concerns of a given society, secondarily expressed through the more widely trumpeted exchange of “supply and demand.” Prices are set through the diffuse exercise of political and social power.

This is pretty close to the traditional narrative of how capital evolves, albeit with an anti-functionalist twist. It is, however, only one side of the story. In fact, the evolution of capital – or credit – parallels the historical development of what I will call a “debt theology,” essentially, a way of looking at human and divine relationships in the terms of obligations, debtors, and creditors. This relationship preceded the development of real capital and still acts as its ethical undercurrent. What we’re going to look at is a brief history of the relationship between obligation and pain, or between debt and cruelty.

Mnemonic Foundations

Friedrich Nietzsche strikes a contemplative pose.

“A thing must be burnt in so that it stays in the memory: only something that continues to hurt stays in the memory.” – Friedrich Nietzsche, On the Genealogy of Morality

Why do people pay their debts? This is not a question that can be answered trans-historically. It can be quite obvious, as observed in pre-capitalist communities, that the obligations incurred by mutual trade and aid help to make society itself possible – simply, that there is really no reason not to help one’s neighbor who needs some grain or shoes. This is a pretty grotesque simplification, but I think we can live with it. The question becomes more complicated with the advent of real socioeconomic hierarchies. Assume, for instance, that you’re a peasant farmer in Sumeria and for some reason have incurred an unpayable debt to a creditor (weddings, funerals, crop failures, and disasters would each be a likely cause) – why would you then attempt to placate your creditor, insisting that you might make managed payments or offering a daughter as security, instead of simply killing him or running away? Both in fact did happen, albeit occasionally. The first reason is, quite simply, the presence of armed men, often with the backing of the law, whose purpose it is to enforce your sub-ordinance in this hierarchy. But let’s not miss the possibility that something more subtle is in play.

Hindu theology in the Taittiriya Samhita, a Vedic text, holds that every person “…when born is born involved in three debts, namely, he owes brahmacarya to sages, sacrifices to gods and progeny to pitṛs.” This concept has a certain familiarity for thinkers in the Western tradition. Theologies have which equate the religious concepts of guilt or sin with the financial concept of debt are quite common in the Christian tradition, regardless of where they stand on the issue of monetary debts. Sin, particularly original sin as inherited through Adam, is often understand in the terms of debt. Why else would the “Son of Man… give his life as a ransom for many” (Mark 10:45) if not for the fact that we owed God some sort of debt? Does not a ransom imply payment? As Luther would later argue, “If there is anything in us, it is not our own; it is a gift of God. But if it is a gift of God, then it is entirely a debt one owes to love, that is, to the law of Christ.” Christ as Redeemer, with salvation as forgiveness. This is why the Lord’s Prayer beseeches God to “forgive us our debts” in Matthew. Curiously enough, we find in Luke the very same line of the Lord’s Prayer, albeit as the following: “Forgive us our sins.

Attempting to understand this relationship between the concept of debt and the concepts of guilt and sin is Nietzsche’s great contribution to our discussion. For there is, in fact, an interplay between the theologies of debt and guilt. As he notes, the German term Schuld, meaning guilt, derives from the word Schulden, meaning debts. The historical origins of this evolution perhaps lie in early Germanic legal codes which extensively specified the weregeld, or honor price, of various injuries done to a person. These prices varied according to the social hierarchy of the individual, but the principle was the same – in doing harm to someone, one incurs a guilt that is represented as a monetary debt. In this sense, the debtor is also the guilty party in the creditor-debtor relationship. Debtors are the sub-ordinate members in this moral hierarchy. Remember, as we learn in Psalms 37:21, “the wicked borrows and does not pay…”

This is, of course, a logic of guilt that also applies as a source of justification for punishment. Nietzsche explores this curious relationship later in the Genealogy, stating:

The equivalence is provided by the fact that instead of an advantage directly making up for the wrong (so, instead of compensation in money, land or possessions of any kind), a sort of pleasure is given to the creditor as repayment and compensation, – the pleasure of having the right to exercise power over the powerless without a thought, the pleasure ‘de faire le mal pour le plaisir de le faire’,47 the enjoyment of violating: an enjoyment that is prized all the higher, the lower and baser the position of the creditor in the social scale, and which can easily seem a delicious titbit to him, even a foretaste of higher rank. Through punishment of the debtor, the creditor takes part in the rights of the masters: at last he, too, shares the elevated feeling of being in a position to despise and maltreat someone as an ‘inferior’ – or at least, when the actual power of punishment, of exacting punishment, is already transferred to the ‘authorities’, of seeing the debtor despised and maltreated. So, then, compensation is made up of a warrant for and entitlement to cruelty.”

Graeber seems to disagree with this in “Debt,” perhaps because he reads the Genealogy as an attack on the idea of a semi-utopian pre-capitalist age. Though there’s no need to explore it here, I don’t find his reading particularly compelling. The logic of pain and sadism that Nietzsche applies are central to our attempt to understand how we’ve come to think about debt. It is certainly true that the practice of debt slavery enhances the power of the creditor – both in the labor that can be extracted from debt slaves and in its perennial use as the ultimate threat of degradation against a “non-producing” debtor. At the same time one wonders about the peculiar brutality of punishments prescribed for defaulting debtors. There is no need to make a choice between a power theory of punishment and a sadist theory of punishment – the two, quite simply, go hand in hand. The contemptible enjoyment that a creditor might have derived from seizing a debtor’s home and enslaving him and his family, or more unusually, having him tortured and killed, is as much an exercise in domination as it is an expression of pure cruelty.

All debts in this theology are ultimately payable in blood. In ancient Rome recalcitrant debtors were punishable by drawing and quartering. Debtors were sold into slavery in ancient Greece, sometimes along with their children. In 18th century Britain debtor’s prisons, the criminalization of poverty and vagrancy, and the invention of the workhouse were symptomatic of the need to inflict pain as punishment for indebtedness. In fact, large portions of the American colonies were initially conceived as grand scale debtor’s prisons. Until the 1830’s in the United States debtors were the only class of criminal for whom long-term incarceration was a possibility. And this is but a brief history of guilt and punishment in but a small sub-section of the Western world of credit.

Pain functions as a mnemonic device that reminds one to pay their debts. Debts, even in present society, exceed traditional ‘moral’ calculation in that they tend to supersede all consideration for the individual’s welfare. Fifteen states in America still imprison people if they cannot pay their debts. That one ‘owes’ someone, most likely a bank, a sum of ones and zeroes is privileged over the disruption of the ‘debtor’s’ family, workplace, community, and most importantly, personal liberty. Consider the following: Any working class American family, having defaulted on its mortgage, will very likely be evicted. What this means is that, if necessary, men armed with guns will come to their house and remove them by force. Their possessions will be auctioned off, their car may be repossessed as penalty, and they will be permanently marked in the global financial system as a credit risk and will likely be systematically denied credit at any reasonable rate. This sort of behavior is sustained by the moral attitude explored above – non-payment is an admission of personal guilt and moral degeneracy, regardless of the circumstances that required that person to incur debts in the first place.

Power and Capital

Distinctions are drawn, of course, based on the social power of the ‘debtors’ in question. People and institutions with capital – or social power – tend to behave like creditors without regard to the origin of their ‘possessions.’ It is in this sense that, even now, national banks like Bank of America who received life-saving loans from the public fisc of the United States are pursuing debt claims against the very same people who paid the taxes that rescued them. And where did that money come from? From institutions of credit, including banks, but also workplaces, who received that capital from the Federal Reserve, which is an institution of the government funded by taxpayer dollars, and so on and so forth. Capital exchange is cyclical – the indicator of power relationships in any given society is quite simply where the emphasis in this cyclical relationship is placed. In ours, the middle class and the working class are the weak links.

Household debt has soared to almost unbelievable levels over the last 30 years

The history of debt is as much a history of power, a history of hierarchy, of violence, of moralities, of social orders, and of mental frameworks as it is a history of economic relationships. Debt is not merely repressive, it is an institution that creates the identities of the debtor and creditor – identities that themselves figure prominently in modern notions of liberation and revolution. In point of fact, one might argue that communal generosity called into existence the cruelty and punishment associated with debt, which even now calls into existence patterns of generosity and resistance to cruelty which could not exist without this very moral notion of debt itself. Moreover, as with all histories, the relationship of debtors and creditors can no more be linearized, standardized, or explained in a totally consistent fashion than can any network of idiosyncratic practices and historical contingencies. As such it cannot be exhausted by a brief essay. My goal was merely to show that the notion of debt goes deeper than your mortgage or your student loan payments.

Debt resistance is increasingly common and increasingly likely. But what happens after our debts are “erased”? This is the most important political question facing resistors and revolutionaries across the political spectrum. It is not enough to simply erase the ledgers and begin again. Power and control are built into modern institutions of credit. The transfer of credit in an economic system depends on the arrangement of social forces of power that may be constructed in any humanly conceivable fashion. The only way to avoid, if momentarily, a perpetual cycle of rising debt, constraint, and exploitation is to effectively balance the power of debtors and creditors. Bankruptcy laws were one such institution that supposedly restored the ability of debtors to free themselves from debt arrangements, albeit at the price of the debtor’s reputation, possessions, and liberty. But they were clearly not enough.

Is it too bold to say that no one should owe another human being anything at all? It might be best to leave our utopia aside, at least for awhile, in a world where every human relationship is becoming increasingly monetized, increasingly defined by the logic of debt, and increasingly controlled by the constraints of what is effectively debt bondage. (And in many parts of the world we are literally talking about debt slavery.) It can scarcely be said that American students who simply did not have the good fortune to be born wealthy should have their lives defined by the purpose of paying back their student loan debts. The same goes for families forced to pay up in an increasingly unaffordable healthcare system to deal with catastrophic injuries and disease. And it seems totally beyond the realm of human decency to evict the victims of deliberate, wide-scale predatory lending from their homes and toss them into the streets.

I think we can say without much difficulty that an increasing amount of personal debt, backed by courts, lawyers, and police departments willing to enforce the will of creditors, is a relatively “functional” aspect of a capitalist economy. It certainly puts pressure on labor to find any possible way to pay off its debts, which of course in practice means wage labor in the capitalist economy. Debt payments make the threat of unemployment much more effective and much more frightening. Debt thus acts as a tool of control and hierarchy between social classes in countries all over the world, much in the same way that public debt acts as a tool to preserve both international financial and domestic social hierarchies.

I will say it unequivocally: The majority of working class people in the United States have no obligation to pay back these loans whatsoever, and would be better served not doing so. The Obama administration and the Congress have done virtually nothing to alleviate mortgage debt or stop evictions, much less deal with student loan debt or household debt in general. And there’s no reason to believe they will. Embryonic resistance to evictions, bankruptcies, and the tools of debt enforcement have already been witnessed all across the United States, and across the rest of the globe as well. We see this pattern in law enforcement officials who refuse to evict citizens from their homes, and in movements that seek to voluntarily cancel debts and void collections. However small, these are significant political acts – and perhaps the beginning of the reclamation of the idea that we have the right to control our own destinies.

There is a certain heroism in all of this – in the willingness of individuals and communities to oppose a global system of hierarchy and control. Can our ultimately diffuse and separate acts actually make a dent in the very system of debt itself? Yes, if we begin to recognize that we validate humanity when we deny the idea that we can place a price on the lives and freedom of human beings. Now is the time for resistance.

Further Reading:

The Debt Resistor’s Operation Manual

The Making of the Indebted Man – Maurizio Lazzarato (MIT Press)

Financialization: What It Is and Why It Matters – Thomas Palley (Levy Economics Institute)

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4 thoughts on “Debt and Credit

  1. I think we can have a good discussion on this.

    Are you critiquing debt or modernity, here?

    “The majority of working class people in the United States have no obligation to pay back these loans whatsoever, and would be better served not doing so.” What would this solve? I don’t think I’m following you.

    I’m confused. If I want to buy a house, but cannot afford to pay the contractor, the plumber, the electrician, the inspectors, the taxes, the painters, the cabinet-makers, the people who make appliances, etc., how do I do this without getting a loan? I do not want to live in an apartment until I’m 60, saving the money needed to buy a home. I understand that housing prices are higher than they should be and are grounded in some fictitious commodities, but the fact remains that I cannot construct a home without other people laboring for me. Are we to just not pay those people for their time? I agree with you that debt is unfair and predatory, but it’s not a construction of the elite. It strengthens the hierarchy, but it also can make a ton of people very happy! The joy of first owning a home! Living “underneath” debt is a necessary evil, I’d say. So to say most people “would be better served” not repaying their loans seems like an overstatement.

    I think your ideas need more development.

    Eg: “The only way to avoid, if momentarily, a perpetual cycle of rising debt, constraint, and exploitation is to effectively balance the power of debtors and creditors.” How? Not repaying your debt would in no way “balance the power” as you’re stating.

    I also take issue with your historical analysis. You are comparing apples to oranges, here. “Primitive societies” do not have a complex system of debt because there is nothing they can purchase. In such a society, if you are hungry, you eat with everyone else. If you are cold, you sleep in the same place as everyone else. If you are sick, people will try to care for you, but if they can’t do so easily, you will die. This is not the case in our modern world. We have decided, as a global society, that we like and need technology (for example). It is difficult to construct a car, airplane, computer, or any other modern thing. If we would like to continue using those things, we need to repay the people who spend their lives constructing them with cash. If we do not have enough cash on hand, we can voluntarily go into debt.

    Yeah, student loans are stupid. Yeah, it’s annoying that financialization has occurred in the US economy.

    But destroying all debt? What would that solve? Would it just mean that no person could construct anything that required more man hours or expertise than any other?

    We are not just wandering through the forest hunting for berries and fire wood anymore.

    • First, I’d like to thank you for your questions. I think they anticipate a few of the more likely objections to what I’ve said. I’ll admit, to start, that my “political program” wasn’t extensively fleshed out at the end of the essay. But it wasn’t supposed to be. And if “No debts between human beings” sounds like a radical proposal, that’s because it is. But let’s start by talking a bit about some of the finer points you highlighted.

      When I said that the people who had been the victims of fraudulent credit practices had no obligation to pay back those loans, I meant it. Just looking at predatory lending that occurred in the lead up to the 2008 financial crisis gives a pretty good example of what I’m talking about. It was common practice to extend ARMs to home buyers with the intention of cranking up the interest rates on those loans after a short period. So after taking out a $250,000 mortgage at 4% interest over 30 years, making payments of about $1500 a month, a borrower suddenly has their rates raised by 6%, which raises their monthly payments to around $2500 a month. This was a widespread and deliberately planned phenomena, and more tellingly, these loans were targeted at poor neighborhoods and racial minorities. Now, disregarding the fact that the principle behind this kind of mortgage is already exploitative (the lifetime payments on that $250,000 house would be $540,000 and $900,000 respectively), it shouldn’t surprise us that “out of nowhere” non-payment, default, and foreclosures increased dramatically. Of course, these hardships which were foisted onto the working and middle classes by the financial industry were then re-monetized and packaged as derivatives which ended up wrecking the global economy, sent those same working/middle class families into unemployment, and ultimately provided record-breaking profits for the executives at Goldman Sachs and Morgan Stanley. TARP funds (read: taxes paid by those middle class families) were disbursed to the biggest financial institutions and the rest, as they say, is history.

      That you understand that student loan debt functions on similarly fraudulent principles is a healthy start. Expanding college costs, which are attributable both to the state’s decision to withdraw funding from public institutions and the larger trend of neo-liberal financialization, have co-emerged with government-backed lending institutions like Sallie Mae which offer some of the most exploitative interest rates available in the non-payday loan market (6.8%+ interest is standard). The cost of attending a public college has risen 500% since 1985. Have the wages offered to college educated workers risen similarly? Absolutely not. Of course, the dirty secret of student lending is that real profit comes from causing borrowers to default: An average of 120% of the initial loan is collected on defaulted student loans. This is likely why it is impossible to declare bankruptcy on student loans – the actual profit comes from extorting capital from college graduates that far exceeds the “service” that was initially provided by the lender. Both of the examples I’ve just offered are samples of how the contemporary debt system actually works and actually turns a profit. That both of these institutions are consistently recognized as fraudulent and exploitative in essence by sober-minded judges and scholars should give us some pause if we’re trying to defend debt as a “necessary evil.” And, as I said above, the people who toil under this system have no obligation whatsoever to pay back loans which were extended from the very beginning in bad faith. When we take a look around at the 76% of Americans who are debtors, it comes time to ask who really owes what to whom.

      Now, you offer the counter-point that sometimes we don’t “have” enough money to get what we want from other people. That’s certainly true. But I’m not willing to go along with the false choice between a debt-society and a cash society where I have to save for sixty years to buy a home. (And, to be perfectly honest with you, there’s no difference between that alternative and being forced to labor for 30 years to “afford” your own home.) Even our contemporary world offers a multitude of counter-examples. Almost half the population of Hong Kong lives in subsidized, affordable housing. Public housing of some form exists in countries countries as far apart as Finland, Spain, Ireland, the Netherlands, Brazil, Australia, and Japan. Israel offered heavily subsidized housing to its Jewish citizens for many years, though recent protests have focused on its limitations. Most of these are constitutive of the modern welfare state, but still we see examples of credits being shifted around in some different way from the paradigm you offered above.

      But, in point of fact, the very idea that we can’t simply build you a house is a basic foundation of modern financialization. Do we have the resources and skills [the materials and skilled labor] to construct houses and apartments for the people who need them? Clearly, but it’s only a matter of engaging in a series of ridiculous financial transactions that will additionally tie the homeowner to regularized, structured payments of labor as a precondition of home ownership that can make this whole process profitable to our elites. The very idea that the plumbers, electricians, carpenters, painters, appliance-makers, etc. need to be paid monetarily for their work only makes intrinsic sense in a system where each and every one of us is in a perpetual state of insecurity about where the money for our next meal or mortgage payment is going to come from. So the idea that people would be better served not paying their fraudulently extended loans is the idea that people would be better served not living in an economic system that reduces them to a series of numbers in a bank account, reduces their freedom to what can be allowed within the context of their debt payments, and expects them to accept the inevitability of a fetishized socioeconomic hierarchy.

      To correct you briefly, yes, contemporary debt society is unfair and predatory and it is a construction of the elite. The great irony that I think you highlight is that most of the social enforcement of this hierarchy is done by the very people who suffer under it – police officers, enlisted soldiers, middling bank clerks, and the like.

      Am I critiquing debt or modernity? It’s hard to make a distinction between the two. If we accept the current politico-economic order as the distinguishing feature of modernity, I have no choice but to critique its greed, its naked violence, and its stupidity. I’m not a “primitivist,” whatever that would look like to you. But criticism of and resistance to the exploitative foundations of our class society requires boldness.

      Resisting debt, contrary to what you seem to claim, is the first step to getting rid of it entirely. I can see no other way to begin this sort of social revolution than through the diffuse actions of individuals. Re-balancing our power with our creditors starts with a refusal to accept the terms of the debt structure that we’ve been offered. The means to combat it are going to, by necessity, be different according to the place, the time, and the needs of the individual who’s trying to escape from the modern day form of debt peonage.

      I appreciate the concern about my historical point. But what do you mean when you say “primitive”? I gave examples of societies that had relatively complex socioeconomic structures and access to a wide range of goods. If you want a perfect example of this, look at the development of Islamic banking in the 11th to 13th centuries. The English village example I highlighted clearly shows that capital flows can exist quite easily without the use of the peculiar financial instruments that are now globally proliferated. That brings us to the question of progress, which you’ve intentionally or inadvertently introduced. Who did this deciding that you’re talking about? A global society? What did that look like? The historical fact is that these developments, essentially the development of modern capitalism, have been stringently resisted in all times and in all places. Trace the Luddites in the early 19th century to the anti-neoliberal movements in the present day. The history of this financialized “progress” that you cite, which has supposedly delivered us the wonders of the car and the radio and the computer, has its historical origins in systems of absolute brutality: the genocides associated with colonialism and the slave trade. If we take a look at actual history we might find that these “decisions” you seem to hail were made with guns and were made by the few at the expense of the great many.

      The suggestion that you offer is this: As we have extended man’s power over nature we have naturally extended the power of some men over all others. I think that the expansion of hierarchy and control has been the product of specific historical contingencies, and I see no necessary link from the airplane and the computer to a global system that increasingly robs ordinary people of the most basic elements of their dignity. The “we” you cite has created a global system of peonage that now seems so natural that it can scarcely seem less than utopian to imagine a world without it. The question I posed in my essay was how this debt system came to exist. My answer: Through the constant application of pain and cruelty. Yes, the technical processes associated with producing modern technological products are quite complicated. And yes, we aren’t just wandering through the woods picking berries anymore. But isn’t that the cruelest part of this whole epoch? That, in a world where global communication is quite literally instant, in which machines are being made that can replicate any three-dimensional product, in which any person can travel anywhere on Earth in less than 48 hours, we survive day-to-day with institutions of control and domination that have never before existed with such power and such global efficacy. We have manufactured poverty in an era of global productive abundance. We have erected arbitrary barriers that keep us from the things we need to feel secure – food, a home, warmth, communication, creation – in the name of an all-encompassing drive for profit. The cruel irony of modernity is that for all the great technologies we have built together we have gained remarkably little.

      What would destroying debt solve? Perhaps, just maybe, we might live in a society that functioned on the principles of cooperation and exchange rather than hierarchy, violence, and fear. We might relearn what it means to be free.

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