Debt & Forgiveness

This summer, Yves Smith at Naked Capitalism opted an interview of social anthropologist David Graeber on the history and evolution of debt in human society. In light of the Occupy Wall Street movement and the expanding debt crisis in Europe, the post is worth revisiting.

First, I highly recommend the entire interview, as it is fascinating to read about the different theories for how debt and money emerged, as well as seeing Graeber offer thoughtful disproofs of common assumptions – namely that barter emerged prior to currency and debt.

But what’s more important in the current moment is the connection between debt, morality, and power. Financial and political elites have made clear in the last three years that their own debts must be wiped out at will, at the expense of the 99%. Graeber responds to a question about the current crisis in Europe:

Well, I think this is a prime example of why existing arrangements are clearly untenable. Obviously the ‘whole debt’ cannot be paid. But even when some French banks offered voluntary write-downs for Greece, the others insisted they would treat it as if it were a default anyway. The UK takes the even weirder position that this is true even of debts the government owes to banks that have been nationalized – that is, technically, that they owe to themselves! If that means that disabled pensioners are no longer able to use public transit or youth centers have to be closed down, well that’s simply the ‘reality of the situation,’ as they put it.

These ‘realities’ are being increasingly revealed to simply be ones of power. Clearly any pretence that markets maintain themselves, that debts always have to be honored, went by the boards in 2008. That’s one of the reasons I think you see the beginnings of a reaction in a remarkably similar form to what we saw during the heyday of the ‘Third World debt crisis’ – what got called, rather weirdly, the ‘anti-globalization movement’. This movement called for genuine democracy and actually tried to practice forms of direct, horizontal democracy. In the face of this there was the insidious alliance between financial elites and global bureaucrats (whether the IMF, World Bank, WTO, now EU, or what-have-you).

When thousands of people begin assembling in squares in Greece and Spain calling for real democracy what they are effectively saying is: “Look, in 2008 you let the cat out of the bag. If money really is just a social construct now, a promise, a set of IOUs and even trillions of debts can be made to vanish if sufficiently powerful players demand it then, if democracy is to mean anything, it means that everyone gets to weigh in on the process of how these promises are made and renegotiated.” I find this extraordinarily hopeful.

This strikes me as exactly what one of the main thrusts of the Occupy movement is about – a desire for debt forgiveness, especially in the face of a system that forgives every bad gamble of financial elites.

Moreover, as we’ve seen recently with Robert Cruickshank’s piece calling for student debt forgiveness and some larger calls for a debt jubilee, there is a growing demand for this to happen. For a long while, those fighting the foreclosure crisis have demanded principle write downs, a moderate form of debt forgiveness that has been strenuously rejected by both political and financial elites. Or, to put it more differently, given the situation of crisis financial and political elites have put the world in, it’s hard to imagine there being a solution on scale to address the depths of the crisis other than jubilee.

This moment of popular anger isn’t going to be solved by a piece of tepid legislation regulating corporate money in politics. This anger isn’t going to be quelled by a financial transaction tax. While a massive infrastructure spending and jobs creation effort in the US could reduce some anger here, it would do little to stop the rage felt by the students and unemployed in Greece, Italy, Spain, and Portugal. Throwing all the banisters in jail would probably help things, at least in so far as restoring a sense of the rule of law, without changing the underlying fundamental problems of our economic system, it’s unlikely that change would be forestalled.

What Occupy Wall Street teaches us is that the scale of the problems we face demand solutions which realistically meet the problem. Occupation is a tactic fit for this crisis. But if we are to begin to answer the complaints of the Occupy movement or Los Indignados or any of the protesters in Greece and beyond, we have to look at how individual people and families have been broken by this elite-centric economy. The problem is debt and solution is forgiveness. The only question will be how long will it take, as Graeber says, for sufficiently powerful people to arrive at this position or for the public to amass enough power to make it happen democratically.

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