Debt as a Weapon

I finished the Spring edition of Lapham's Quarterly called Trade.  A good read, especially in light of the current Administration's attempts to use trade as a weapon to attain goals, financial, as well as in other areas of conflict. 

One of the articles in the edition was written by David Graeber.  As I was not familiar with him, and expect you may not be as well, I did just a bit of research which I encourage you to do as well.  Perhaps the most revealing quote I found was from an article he wrote in Strike! magazine.

In the year 1930, John Maynard Keynes predicted that, by century’s end, technology would have advanced sufficiently that countries like Great Britain or the United States would have achieved a 15-hour work week. There’s every reason to believe he was right. In technological terms, we are quite capable of this. And yet it didn’t happen. Instead, technology has been marshaled, if anything, to figure out ways to make us all work more. In order to achieve this, jobs have had to be created that are, effectively, pointless. Huge swathes of people, in Europe and North America in particular, spend their entire working lives performing tasks they secretly believe do not really need to be performed. The moral and spiritual damage that comes from this situation is profound. It is a scar across our collective soul. Yet virtually no one talks about it.

The success of the article led Graeber to write the book Bullshit Jobs: A Theory which I just added to my list of books to read. 

Anyway, Graeber's entry in Lapham's was from his first book, Debt: The First 5,000 Years.  In this excerpt, Graeber recounts a discussion he had when in London with a young attorney with whom he was discussing his work with the anti-globalization movement.  Yes, Graeber is a well known activist, anarchist activist according to those who disagree with his opinions.  The discussion he had that day surrounded his belief that the IMF, that is the International Monetary Fund, had been part and parcel to the economic destruction of many a third world country.  His belief was that as the world's debt collector, they encouraged debt by these underdeveloped countries to the world's largest banks, debts that those countries would struggle to repay, which many people knew, but debts which were guaranteed to be repaid, so that the big banks had no risk. 

It is famously said (and I am paraphrasing this) that rich people love capitalism on the way up, but socialism when faced with adversity.  In other words, they are all into rags to riches stories, and the power of individualism, and each man pulling his own weight, and reaping the rewards of hard work and smart investment, until something goes wrong.  And then they run to the government for a bail out
or tax write off (bankruptcy laws) or some other version of social intervention to rescue them from their
poor decisions.

In the encounter mentioned above, Graeber casually suggested that perhaps those countries should not have paid their debts, which surprised the young attorney who believed that if they borrowed the money, "Surely, one has to pay one's debts".

And so we have the conundrum.  Everyday people are taught that repaying one's debts is proper. perhaps even moral.  And, in fact, there are laws that support that belief.  If you recall the scene in Scrooge when, asked for some contribution to help the poor, he wonders if places like debtors prisons are no longer in operation, you get the idea of how debt was handled then.     

Now, of course, we have credit cards which are really just legal debt.  Unfortunately, we are expected to be good consumers to keep the economy flowing, and to keep purchasing the newest and best products, especially in the technology fields.  And so we charge it all, some of us, those with the best credit ratings which means the better ability to repay, getting lower interest rates, those with the worst ability to repay (the higher risks one might say), paying the most interest.  A circle which seems to exacerbate the growing income inequality trend. 

I certainly have my share of debt.  I use zero percent transfer balance offers to pay as little interest as possible, and have even shifted some of the debt I accumulated for my children's education to this vehicle.  Invariably, when I close an account which has run its course of 15 or 18 months of interest free time, I am told that by opening and closing credit cards so often, I injure my credit rating.  In other words, by using their freely offered low interest cards for the free interest time frame, credit card companies want to punish me because I am not paying them exorbitant interest rates, one of the main areas of their revenue and profit.  Can you say a hundred billion dollars per year?  No wonder they don't like my game of revolving credit and so work with the credit rating companies to rig
the rules to punish me.

Ah, capitalism at its finest.  Get rich, no matter how you do it.  (A topic for the future, I imagine).

I read the other day about companies offering new workers the option of paying down their education debt by using future earnings.  Sounds like a good way to keep workers in line and with the company, and a good way to combat high turnover rate among people who are always looking for something better.  Kind of like connecting health care to employers.  (Oops, another future topic).

Clearly, we do not want to encourage people to avoid their debts.  That is a reason why the commercials that tell you that you don't have to pay off your credit cards, irks me a bit.  Now, I know that part of that program is to get the credit card company to accept principle payments only and excuse or reduce the interest that may have accumulated on a $10,000 debt that is 5 years old at 9% interest, which is below the average rate.  But it is hard to ignore such high interest rates (they used to be called loan shark rates), which are clearly meant to improve bottom line profits for banks and their shareholders, not help the American public purchase a product that they might need to improve their lives.  Still, when a rich person can make an investment in a real estate venture, then deduct the loss from their future tax burden for 5 or even 10 years, it sounds like the system includes separate rules for the rich and poor.  Rules that were invariably written by the rich, not coincidentally.

Debt as a weapon, used as the other side of the coin of rampant commercialism and consumerism, to keep the working class too busy to look around and see what is going on.  Or, if you believe John Maynard Keynes, to keep us working 40+ hours a week in the first place when we don't need to.