Debt Culture

Debt has been ingrained in our cultures since at least Mesopotamian times (5000BC). This article argues that when debt becomes a way of life, that debt becomes meaningless. Let’s look at these arguments and see if they are valid.

Debt is how most people are making ends meet

CM: How important, then, is debt—or maybe more precisely, credit—in the quality of life that we now enjoy? That is, how much would we suffer, and how much would we have to sacrifice if we didn’t have access to debt through credit?

AM: For a lot of working and middle class people, it is the only way that they are able to continue to survive, given the stagnation of wages over the last few decades. I think that’s true for the economy as a whole as well. The economy depends on the credit relationships that allow us to continue to purchase consumer goods even when our wages are stagnating. The economy depends on the ability to defer payment.

Corporations depend on the ability to defer payment into the future. But they depend on that payment eventually being made. One of the ways to start thinking about how to resist capitalism is to think about how to refuse to make those payments. Because that deferral has to come to an end at some point, and finding a way, collectively, to refuse to allow that debt to be paid, is probably the only way out of capitalism that we have at the moment.

CM: How much is debt, and greater access to credit, the cause of the boom-and-bust, bubble-bursting, precarious, unstable economic era we are living in (dating back all the way to the NASDAQ bubble of the 1990s, if not earlier)?

Debt is how capitalism solved the central imbalance to capitalist practice
AM: It’s become totally central. And that’s a historical shift. It’s one of the shifts that the book is very much about. Consumer credit used to be at the margins of the consumer economy. It used to be what allowed people to purchase larger luxury goods (automobiles being the best example, but home appliances, too), and it used to be a way to smooth consumption over the course of a borrower’s lifetime. You might have ups and downs a little bit in your income, but you could still have basically the same quality of life by using credit and debt in those small ways.
And starting in the late 1970s and early 1980s, that really changed. One of the things that happened was that consumers increasingly did not make enough income to pay for the basic necessities of life. They did not make enough income to maintain their standard of living.

The other thing that happened was manufacturing was starting to stall and profit rates were starting to drop on industrial production, so capitalists were looking for new domains of investment. And the one that they found was debt, essentially. That’s where we had the creation of increasingly complicated debt securities, with speculative financial instruments based on things like mortgage payments or credit card payments. That solved, for a period, these two vectors of potential crisis in capitalism: inadequate opportunities for investment on the capitalist side, and inadequate income on the workers’ side.

So debt became increasingly important. It was central to the expansion of the dot-com bubble, and even more central to the bubble of the 21st century, the housing bubble that started some time after 2001 or thereabouts, where incidentally the federal government was increasingly putting policies into place around the financing of home ownership that encouraged speculative capital to enter these markets, encouraged people to get larger and larger mortgages, and encouraged the creation of subprime lending (which was obviously a huge part of the crisis of 2008).
So it’s gone from being at the margins of the economy to being at the dead center of the US economy in the last three or four decades.

Debt has become a part of our social and moral culture
But are there political consequences of debt, or are there impacts that debt has on our ideas of personhood and moral character that we do not recognize as being connected to debt? Do we have issues that we’re not willing to admit debt has caused?

AM: Absolutely. Debt has always been connected to this sense of shame, which has worked really well for creditors. It is an incredibly effective way to frame it; it is what compels people to continue making payments on a house, for instance, even though they are “under water” on it (when making payments will never get them out of the situation that they are in). Creditors have relied on that ideology to convince people to repay debts even when those debts are exploitative or when (as in the case of subprime loans) the person was put into a situation which was impossible from the beginning—they were never going to be able to pay that debt off, and the creditors knew that. That ideology has been very effective, so breaking the assumption that we have a moral obligation to repay is the site of a lot of possibility.

We can tell that it’s a site of a lot of possibility because at exactly the moment that more and more people are realizing that this moral obligation is bogus, there are financial planners, people like Suze Orman, saying that debt is an “addiction,” saying that debt is a failure of moral character, saying that debt is a failure of will. Michael Lewis, the journalist who has written a lot about the financial crisis, including The Big Short, compares debt to obesity, saying that Americans can’t help themselves when faced by a big piece of chocolate cake—that’s somehow is supposed to be an apt analogy for indebtedness.

All of those framings of debt as a failure of will or a failure of moral character assume that people are getting into debt to do things like buy yachts or buy flatscreen TVs. But if we really look at it, they are going into debt to pay for housing, food, healthcare, childcare, and education. That’s just one example of how the transformation and re-transformation of our ideas around these things really does make a difference both politically and historically.

P.S. Another small issue is that our economic values are perhaps not honestly appraised
Of the top 20 region-sectors ranked by environmental impacts, none would be profitable if environmental costs were fully integrated. Ponder that for a moment: None of the world’s top industrial sectors would be profitable if they were paying their full freight. Zero.
That amounts to an global industrial system built on sleight of hand. As Paul Hawken likes to put it, we are stealing the future, selling it in the present, and calling it GDP.

The distance between today’s industrial systems and truly sustainable industrial systems — systems that do not spend down stored natural capital but instead integrate into current energy and material flows — is not one of degree, but one of kind. What’s needed is not just better accounting but a new global industrial system, a new way of providing for human wellbeing, and fast. That means a revolution.