Barbelith Underground > Head Shop > How do we feel about personal debt?

So, personal debt seems to be a big issue at the moment. Media in the UK, where I live, is filled with reports about soaring levels of debt (trademark all national dailies) – both mortgages and personal unsecured loans – with particular concern about growing personal bankruptcies and the use of IVAs. Speaking to friends and family in Australia (where I’m from), I sense that there is growing concern about it there also, and looking around US news on the internet there seems to be at least a recognition of it as an issue, though it would be helpful to have some perspectives from there to help round out the picture.

Lately, I’ve been thinking a lot about my attitude to debt and people in debt, and I find that I have some deeply conflicting ideas and opinions that I’m struggling to resolve. At the risk of making a fool of myself, I think I’d like to explore philosophies of debt – if that makes sense.

The me bit: I’m not in debt, I’ve never been in any serious debt (I have on occasion had to pay off a credit card bill over a number of months at ridiculous rates of interest, but that’s about it) and I would go so far as to say the idea of being in debt makes me very uneasy. If I can’t afford it, I don’t have it and never have. Throughout my childhood, my family was not well off – not poor, but constantly in quite threatening levels of debt. At one point, my father was bankrupted, we lost the family home, my family were split apart (albeit only temporarily) as my father moved to a new part of the state to start again and a period of great difficulty for my mother and younger brother ensued. This happened to be just when I was starting University which meant that on the one hand, I was spared some of the uglier family side of things, but on the other I faced a very difficult time having to support myself at Uni from the outset. For slightly complicated reasons, I did not qualify for any state support, so worked three jobs, almost around the clock for four days a week to support myself. I’ll be honest, I didn’t mind and didn’t at that time feel it a particular hardship but it was very hard work. I did, however, see the huge distress that being in debt caused my mother – I think she genuinely felt in a state of constant fear and possibly shame. It was debilitating for her.

I’ve been travelling and living abroad for ten years now and I have never been without a ‘safety net’ amount of money – a mythical figure which in my head equates to being able to change everything if I need to. Usually about £1,000. At times, this has meant living poorly, but this seems a reasonable trade-off to me.

I recognise that I am very fortunate in having a good degree which makes me reasonably employable. I have never been without a job and always feel confident that if I want to leave a job, I’ll get another. I earn reasonably well, but then I don’t buy a lot of things (except books, with which I have almost no willpower at all) and my biggest extravagance is travel. I think I’m quite a low level consumer.

Sorry that the above is so long, but I think it’s got a lot to do with my attitude to debt. Which is where the conflict comes in. I despise the current capitalist system, which I believe is a deeply inequitable one, yet I find myself increasingly unsympathetic to many of the people who find themselves facing unsustainable debt levels. And I wonder what the consequences of a society increasingly built on debt-financed consumption will be. This is really difficult for me to admit, but I think there are some people who over-consume and that they have unreasonable (?) expectations of what the material trappings of life should be.

Problem 1: I am clearly putting people into two categories of debt – worthy and unworthy. That is, I really feel for people who struggle to make ends meet, to pay rent/mortgage, put food on the table, clothe themselves and their families, etc. I do not feel this sympathy for people that I have decided are in debt for unworthy reasons. Group two includes friends and family members (I have a 30 year old younger brother who earns well and is in shocking debt because of his lifestyle choices – he won’t even buy second hand furniture for his rented house, but took out a loan to buy furniture!) so this is not some kind of middle class, them bashing exercise. The value judgement I am making here makes me deeply uneasy yet I would be lying to say it’s not how I feel. I seem to think that I can determine what is essential debt (those without choice) and non-essential debt (those who choose). At heart, I think the latter are being hurt by their own greed. But who the fuck am I to decide what people have a right to expect to be able to consume or to criticise others for aspiring to a lifestyle which I think is excessive.

Problem 2 – as an anti-capitalist, why the fuck should I care if people get into debt, even if they can’t repay it? One of my best friends is an expert in avoiding re-paying debt. I’ve been at him for ages to write a book about it. He knows who to borrow from, how to borrow it, who you can not pay, how to avoid paying. On the one hand, I think this rocks and I cannot think of a single ethical objection to it. Sticking it to the banks, those fuckers, etc. But I know I wouldn’t do it. And I don’t find myself cheering when I read press reports about someone who racks up huge debt levels on holidays, cars, clothes, etc, declares themselves bankrupt and effectively walks away paying only a fraction of their debt through an IVA. Surely this is hypocrisy on my part?

Problem 3 – so who does pay for this? By which, let me be perfectly clear, I don’t mean me. But despite massive personal debt levels and growing insolvencies, bank profits continue to soar. So who is paying for this? It’s clearly not the wealthy, because they’re getting wealthier. I suspect that it’s trickling down to those already least well off in the form of higher bank charges, interest rates, possible prices in some areas, but I don’t really know. What I really fear is that we are pushing toward some kind of debt tipping point, where all those in both groups (my worthy/unworthy dichotomy) find themselves in serious, life threatening poverty and despite my seemingly judgemental attitude, I really really don’t want this to happen to anyone.

Problem final – isn’t widespread use of debt both facilitating and encouraging levels of consumption that are unsustainable for environmental reasons? Should we all buy everything we want all the time and is it making us happy? Are we asking ourselves, less often, whether we need things, as opposed to just want them, and is that a bad thing (it’s pretty obvious from the way I’ve framed the question that I think so, but again, who the fuck am I to make this judgement)?

I’m sorry that this has been such a long post, but I wanted to set out a broad picture of what I’m trying to grapple with. I probably sound like some kind of evil, judgemental puritan, which I’m not (honest). I hope I don’t sound like an utter bastard. Aaaargh – help me, people.

What are other people’s experiences of debt? What are other people’s attitudes to debt? Does it matter? Where does it end? How does it tie in to attitudes and activities in society? Is it actually just a great equaliser giving those with less greater access to what only those with more would once have had? I’d really appreciate help exploring this issue and reading other people’s philosophies.

*Disclaimer – in the light of recent policy discussion about the Head Shop I am trying to be brave and putting this in here in the hope that it is appropriate. If people feel that it is too anecdotal and that it would be more suited to the Conversation I am absolutely happy for it to be moved.

Also, while reading around on the subject, I found this thread on capitalism, and there are some posts on this page which have some interesting things to say about debt which might be helpful.

capitalism requires indentured slavery

Yes, I think its worth trying to tie the expansion of debt to the more general functioning of capital. My knowledge here is a little shaky (gleaned from other message boards and a few articles by David Harvey), but as I understand it debt serves to redistribute wealth 'upwards'.

You can see this in the move towards neo-liberal policies on the international level. The classic example is the 'Volcker shock' and its effect on international debt from countries like Mexico to the US.

Here's Harvey's description of what happened:

In the October of 1979, Paul Volcker, Chairman of the US Federal Reserve, engineered a draconian shift in US monetary policy. The long-standing commitment in the US to the principles of the New Deal, which meant broadly Keynesian fiscal and monetary policies with full employment as the key objective, was abandoned in favour of a policy designed to quell inflation no matter what the consequences might be for employment or, for that matter, for the economies of countries (such as Brazil and Mexico) that were highly dependent upon economic conditions and sensitive to interest-rate shifts in the US. The real rate of interest, that had often been negative during the double-digit inflationary surge of the 70s, was rendered positive by fiat of the Federal Reserve. The nominal rate of interest was raised overnight...to close to 20%, deliberately plunging the US, and much of the rest of the world, into recession and unemployment. This shift, it was argued, was the only way out of the grumbling economic crisis of stagflation that had characterized the US and much of the global economy throughout the 1970s.

Rather than have countries like Mexico, who were essentially bankrupted by the shift in US interest rates, default on their loans, the US used the IMF to roll over the debt in return to structural reforms in the country in question (Mexico in 82-4 was the first example). Harvey again:

In return for debt rescheduling Mexico was required to implement institutional reforms, such as cuts in welfare expenditures, relaxed labour laws and privatization, a procedure that came to be known as "structural readjustment".

This restructuring opens up new territories for international capital (as nationalised industries etc are privatised). Debt is fundamental to this sort of neo-liberal restructuring, aand the increase in accumulation that results. But its expansion is also a symptom of the changing shape of international capital:

During the 1970s much of this conflict [between money capital and production/manufacturing capital] disappeared. The large corporations became more financial in their orientation even when, as in the automobile sector, they were engaged in production. The interests of owners and managers were fused by paying the latter in stock options. Stock values rather than production became the guiding light of economic activity and, as later became apparent with the collapse of companies like Enron, the speculative temptations that resulted could become overwhelming. The general effect was that financial interests (the power of accountants rather than engineers) gained the upper hand within the ruling class and ruling class elites. Neo-liberalism meant, in short, the financialization of everything and the relocation of the power center of capital accumulation to owners and their financial institutions at the expense of other factions of capital.

This has a number of effects - particularly important, with reference to debt, is the way it allows companies and banks to hold assets across legislative borders and, more pertinently, to transfer wealth from poorer countries back to richer ones (in the form of interest paid on loans, or IMF-induced structural reforms which open up new territories for international capital).

Now, I think similar things can be said about personal debt. The financialization mentioned in the Harvey quote above came about because of a steady decrease in the rate of capital accumulation. Instead of profit being generated by production, as it was traditionally, there is an increasing focus on (among other things) debt and credit. In the short-term this allows the redistribution of wealth 'downwards' (or laterally); in the medium-term though it ensures an upward movement of wealth, in the form of repayment and most importantly interest.

The point about the move from social democratic policies under Reagan and Thatcher, and the changing shape of Western economies (financialization as a move away from production) is that it put increasing pressure on the working class. Some people see the increase in personal debt as capital's solution to the decline in real wages and removal of the safety-net provided by a strong welfare state. I think this relates to what I've heard about the situation of some workers in the US, who only manage to continue living by constantly accruing debt, which their salary will never be able to pay off.

So basically Keynesianism and social democracy ceased to provide a good environment for progressive accumulation, the economy was reorganised, but this required undermining various features of society that provided some sort of decent living standards for working people (cut backs in the welfare state, undermining the unions, etc). Some people see the increase in personal debt as a way of blunting the effects of these changes.

Importantly, none of this requires radical new methods of capital accumulation (except perhaps encouraging 'consumerism', as other posters have pointed out; this means more business for shops, and more assets + interests for financial institutions in the form of consumer debt). Still, credit is essentially based upon the promise of a future upturn in the accumulation of surplus value, sufficient to pay off the debt accrued by everyone from individuals to countries. Unless new areas for accumulation are found, then capital is in trouble (Harvey and other people tie this to new attempts at 'primitive accumulation', e.g. the invasion of Iraq).

Combine problems on the international level with the possibility of more and more individuals defaulting on their loans, or becoming desperate enough to organise against capital, and it doesn't look particularly sustainable (someone told me that the success of campaigns like Justice For Janitors was partly connected to the desperation of workers who were just piling up debt, and who had no real options except direct action)

I'm not sure what that means for us. Perhaps more attempts at primitive accumulation, but then Iraq is proving very costly and increasingly unpopular. People who seem to know about these things are predicting a reverse of the financialization effected by Thatcher et al and a return to production. I don't really understand what this means, but I think it implies some future tension between the richer parts of society (i.e. people whose money comes from the financial industry, and people who want a return to investment in production that would shift capital away from it).

[Incidentally, I think all the David Harvey quotes came from Neo-Liberalism and the Restoration of Class Power which can be found in Spaces of Global Capitalism: Towards a Theory of Uneven Development]