This is the first of three article installments running this week through Wednesday.
Financial markets are political. Stock markets, bond markets and derivatives markets do not merely (or even primarily) raise capital for goods and services. Rather, they all have direct and often harmful effects on people’s everyday lives.
Our public universities issue bonds to cover the shortfall from tax cuts and, in turn, use ever-rising tuition dollars as collateral. Our mortgage, car and credit card payments are all securitized into short-term, lucrative investments for banks and investors, while for us they are shelter, food, and merely getting by. The municipal bond and sovereign debt markets have had plainly disastrous effects from Detroit to Puerto Rico to Greece—but for some they have been spectacularly profitable.
If financial markets are political, how can we contest them and their effects? What does civil disobedience and collective power look like in the age of finance? The Debt Collective is attempting to answer that question by piloting a new kind of organization: a debtors’ union.
You Say Finance, We Say Debt
Today, 75 percent of U.S. households hold consumer debt. All indications are that for most Americans, debt has become a basic fact of life—a circumstance necessary just to get by.
Of indebted households, 40 percent use credit cards to cover basic living costs including rent, food, and utilities. Some 62 percent of personal bankruptcies in the U.S. are linked to illness and health care costs. In the wake of the mortgage crisis, African American families lost 50 percent of their collective wealth and Latino communities have lost an astounding 67 percent of total wealth.
In households that do not use formal banking services, 10 percent of families’ annual income goes to alternative financial services including revolving debts and exorbitant interest payments to check cashers and payday lenders. In 2015, US students graduated from college with an average of $35,000 in debt, and defaults on student debt are now occurring at the rate of one million per year.
These experiences of mass indebtedness ramify through credit scores and reports, which ensure that people with lower scores pay higher interest rates, have a harder time finding places to live, and in many cases are even denied opportunities for work, thus reproducing cycles of debt and inequality.
Cities, states and entire countries have also been remade in the current debt-finance nexus. While both municipal and sovereign bonds have been in use for centuries (to fund infrastructure, public education and war, among other state endeavors), municipal debt alone has increased 800 percent over the past thirty years. As tax receipts have plummeted, cities turn increasingly to Wall Street for money, and they have been met with LIBOR fraud, toxic swaps, and capital appreciation bonds with ballooning interest rates on the order of payday loans.
Massive bankruptcies in Jefferson County, Alabama and Detroit, Michigan, offer two recent examples of what happens when the finance industry decides where and how to invest municipal capital, always demanding a profit on “public” investment. And of course we all watched with baited breath as Greece took on its creditors in a protracted battle over control of a semi-sovereign state. The fight in Greece was only the most recent sovereign debt struggle in the era of finance, and was preceded of course by Argentina, Mexico, Indonesia, Mozambique, and most of the Global South in the era of structural adjustment.
Widespread municipal, state and sovereign austerity mean ever more virulent forms of individual indebtedness. According to a recently filed class-action lawsuit, the city of Ferguson, Missouri runs a modern debtors’ prison scheme in which impoverished people are routinely jailed because they are unable to pay debts incurred in the “criminal justice” system. The lawsuit details how Ferguson families take money needed for food, clothing, rent and utilities to pay ever-increasing court fines, fees, costs, and surcharges. When they cannot pay, they are imprisoned.
Debt, Power and Exploitation
Needless to say, Ferguson is not alone. Across the United States, debt (along with outright state terror) often acts as a fearsome mechanism of racist social control—Jefferson County’s and Detroit’s bankruptcies must also be understood in this light. From Ferguson to Greece, debt is about power and subordination as much as it is about repayment at a profit.
It is no coincidence that these forms of indebtedness have risen exponentially along with the rise of Wall Street. Since business leaders re-discovered a more confrontational and unified class-based politics from above, they have managed to shrink wages and worker power while directing governments’ budgets away from the provision of public goods and the anti-poverty measures of the post-WWII period. Yet business profitability depends on consumer demand—indeed, global capitalism during the neoliberal era has relied in large part on the power of US consumers’ inclination to push their money back into the dollar-driven import-export cycle.
In the face of stagnant or declining wages, the obvious solution has been simply to lend consumers the money. More credit/debt means that an increasingly financialized business class actually gets paid (in the form of interest, fees and derivative profits) to provide the rest of us the money needed to keep demand inflated (until it pops!).
It is more profitable for the creditor class—in the short and medium term—to lend money at interest than to transfer it in wages. And as the government has offloaded the costs of public goods including medical care and education onto consumers, the demand for debt has only grown. In other words, credit has stepped in to “compensate” for falling wages, and debt thus becomes one of the central mechanisms of exploitation.
What does this mean for us? As finance capitalism expands, so too do our debts: the financial sector has rapidly become the way we access many basic goods and services—food, shelter, medical care, education.
In this terrain of mass indebtedness, disempowerment, and debtors’ prisons, what does collective action look like? What does civil disobedience look like in the age of finance? What forms of material and conceptual subversion can we imagine?
Stay tuned for the second installment of this article tomorrow.
3 WAYS TO SHOW YOUR SUPPORT
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