Debt

  Economists who themselves do not believe in the future of capitalism will tend to ignore the dynamics of chance and faith that largely will determine that future. Economists who distrust religion will always fail to comprehend the modes of worship by which progress is achieved. Chance is the foundation of change and the vessel of the divine.28

  Such effusions inspired evangelists like Pat Robertson to declare supply-side economics “the first truly divine theory of money-creation.”29

  Meanwhile, for those who could not simply create money, there was a quite different theological dispensation. “Debt is the new fat,” Margaret Atwood recently remarked, struck by how much the advertisements that surround her daily on the bus in her native Toronto had abandoned their earlier attempts to make riders panic about the creeping terrors of sexual unattractiveness, but instead turned to providing advice on how to free oneself from the much more immediate terrors of the repo man:

  There are even debt TV shows, which have a familiar religious-revival ring to them. There are accounts of shopaholic binges during which you don’t know what came over you and everything was a blur, with tearful confessions by those who’ve spent themselves into quivering insomniac jellies of hopeless indebtedness, and have resorted to lying, cheating, stealing, and kiting cheques between bank accounts as a result. There are testimonials by families and loved ones whose lives have been destroyed by the debtor’s harmful behaviour. There are compassionate but severe admonitions by the television host, who here plays the part of priest or revivalist. There’s a moment of seeing the light, followed by repentance and a promise never to do it again. There’s a penance imposed—snip, snip go the scissors on the credit cards—followed by a strict curb-on-spending regimen; and finally, if all goes well, the debts are paid down, the sins are forgiven, absolution is granted, and a new day dawns, in which a sadder but more solvent man you rise the morrow morn.30

  Here, risk-taking is in no sense the vessel of the divine. Quite the opposite. But for the poor it’s always different. In a way, what Atwood describes might be seen as the perfect inversion of the prophetic voice of Reverend King’s “I Have a Dream” speech: whereas the first postwar age was about collective claims on the nation’s debt to its humblest citizens, the need for those who have made false promises to redeem themselves, now those same humble citizens are taught to think of themselves as sinners, seeking some kind of purely individual redemption to have the right to any sort of moral relations with other human beings at all.

  At the same time, there is something profoundly deceptive going on here. All these moral dramas start from the assumption that personal debt is ultimately a matter of self-indulgence, a sin against one’s loved ones—and therefore, that redemption must necessarily be a matter of purging and restoration of ascetic self-denial. What’s being shunted out of sight here is first of all the fact that everyone is now in debt (U.S. household debt is now estimated at on average 130 percent of income), and that very little of this debt was accrued by those determined to find money to bet on the horses or toss away on fripperies. Insofar as it was borrowed for what economists like to call discretionary spending, it was mainly to be given to children, to share with friends, or otherwise to be able to build and maintain relations with other human beings that are based on something other than sheer material calculation.31 One must go into debt to achieve a life that goes in any way beyond sheer survival.

  Insofar as there is a politics, here, it seems a variation on a theme seen since the dawn of capitalism. Ultimately, it’s sociality itself that’s treated as abusive, criminal, demonic. To this, most ordinary Americans—including Black and Latino Americans, recent immigrants, and others who were formerly excluded from credit—have responded with a stubborn insistence on continuing to love one another. They continue to acquire houses for their families, liquor and sound systems for parties, gifts for friends; they even insist on continuing to hold weddings and funerals, regardless of whether this is likely to send them skirting default or bankruptcy—apparently figuring that, as long as everyone now has to remake themselves as miniature capitalists, why shouldn’t they be allowed to create money out of nothing too?

  Granted, the role of discretionary spending itself should not be exaggerated. The chief cause of bankruptcy in America is catastrophic illness; most borrowing is simply a matter of survival (if one does not have a car, one cannot work); and increasingly, simply being able to go to college now almost necessarily means debt peonage for at least half one’s subsequent working life.32 Still, it is useful to point out that for real human beings survival is rarely enough. Nor should it be.

  By the 1990s, the same tensions had begun to reappear on a global scale, as the older penchant for loaning money for grandiose, state-directed projects like the Aswan Dam gave way to an emphasis on microcredit. Inspired by the success of the Grameen Bank in Bangladesh, the new model was to identify budding entrepreneurs in poor communities and provide them with small low-interest loans. “Credit,” the Grameen Bank insisted, “is a human right.” At the same time the idea was to draw on the “social capital”—the knowledge, networks, connections, and ingenuity that the poor people of the world are already using to get by in difficult circumstances—and convert it into a way of generating even more (expansive) capital, able to grow at 5 to 20 percent annually.

  As anthropologists like Julia Elyachar discovered, the result is double-edged. As one unusually candid NGO consultant explained to her in Cairo in 1995:

  Money is empowerment. This is empowerment money. You need to be big, need to think big. Borrowers here can be imprisoned if they don’t pay, so why be worried?

  In America we get ten offers for credit cards in the mail every day. You pay incredible real interest rates for that credit, something like 40 percent. But the offer is there, so you get the card, and stuff your wallet full of credit cards. You feel good. It should be the same thing here, why not help them get into debt? Do I really care what they use the money for, as long as they pay the loan back?33

  The very incoherence of the quote is telling. The only unifying theme seems to be: people ought to be in debt. It’s good in itself. It’s empowering. Anyway, if they end up too empowered, we can also have them arrested. Debt and power, sin and redemption, become almost indistinguishable. Freedom is slavery. Slavery is freedom. During her time in Cairo, Elyachar witnessed young graduates of an NGO training program go on strike for their right to receive start-up loans. At the same time, just about everyone involved took it for granted that most of their fellow students, not to mention everyone else involved in the program, was corrupt and exploiting the system as their personal cash cow. Here too, aspects of economic life that had been based on longstanding relations of trust were, through the intrusion of credit bureaucracies, becoming effectively criminalized.

  Within another decade, the entire project—even in South Asia, where it began—began to appear suspiciously similar to the U.S. subprime mortgage crisis: all sorts of unscrupulous lenders piled in, all sorts of deceptive financial appraisals were passed off to investors, interest accumulated, borrowers tried to collectively refuse payment, lenders began sending in goons to seize what little wealth they had (corrugated tin roofs, for example), and the end result has been an epidemic of suicides by poor farmers caught in traps from which their families could never, possibly, escape.34

  Just as in the 1945–1975 cycle, this new one culminated in another crisis of inclusion. It proved no more possible to really turn everyone in the world into micro-corporations, or to “democratize credit” in such a way that every family that wanted to could have a house (and if you think about it, if we have the means to build them, why shouldn’t they? are there families who don’t “deserve” houses?) than it had been to allow all wage laborers to have unions, pensions, and health benefits. Capitalism doesn’t work that way. It is ultimately a system of power and exclusion, and when it reaches the breaking point, the symptoms recur, just as they had in the 1970s: food riots, oil sh
ock, financial crisis, the sudden startled realization that the current course was ecological unsustainable, attendant apocalyptic scenarios of every sort.

  In the wake of the subprime collapse, the U.S. government was forced to decide who really gets to make money out of nothing: the financiers, or ordinary citizens. The results were predictable. Financiers were “bailed out with taxpayer money”—which basically means that their imaginary money was treated as if it were real. Mortgage holders were, overwhelmingly, left to the tender mercies of the courts, under a bankruptcy law that Congress had a year before (rather suspiciously presciently, one might add) made far more exacting against debtors. Nothing was altered. All major decisions were postponed. The Great Conversation that many were expecting never happened.

  We live, now, at a genuinely peculiar historical juncture. The credit crisis has provided us with a vivid illustration of the principle set out in the last chapter: that capitalism cannot really operate in a world where people believe it will be around forever.

  For most of the last several centuries, most people assumed that credit could not be generated infinitely because they assumed that the economic system itself was unlikely to endure forever. The future was likely to be fundamentally different. Yet somehow, the anticipated revolutions never happened. The basic structures of financial capitalism largely remained in place. It’s only now, at the very moment when it’s becoming increasingly clear that current arrangements are not viable, that we suddenly have hit the wall in terms of our collective imagination.

  There is very good reason to believe that, in a generation or so, capitalism itself will no longer exist—most obviously, as ecologists keep reminding us, because it’s impossible to maintain an engine of perpetual growth forever on a finite planet, and the current form of capitalism doesn’t seem to be capable of generating the kind of vast technological breakthroughs and mobilizations that would be required for us to start finding and colonizing any other planets. Yet faced with the prospect of capitalism actually ending, the most common reaction—even from those who call themselves “progressives”—is simply fear. We cling to what exists because we can no longer imagine an alternative that wouldn’t be even worse.

  How did we get here? My own suspicion is that we are looking at the final effects of the militarization of American capitalism itself. In fact, it could well be said that the last thirty years have seen the construction of a vast bureaucratic apparatus for the creation and maintenance of hopelessness, a giant machine designed, first and foremost, to destroy any sense of possible alternative futures. At its root is a veritable obsession on the part of the rulers of the world—in response to the upheavals of the 1960s and 1970s—with ensuring that social movements cannot be seen to grow, flourish, or propose alternatives; that those who challenge existing power arrangements can never, under any circumstances, be perceived to win.35 To do so requires creating a vast apparatus of armies, prisons, police, various forms of private security firms and police and military intelligence apparatus, and propaganda engines of every conceivable variety, most of which do not attack alternatives directly so much as create a pervasive climate of fear, jingoistic conformity, and simple despair that renders any thought of changing the world seem an idle fantasy. Maintaining this apparatus seems even more important, to exponents of the “free market,” even than maintaining any sort of viable market economy. How else can one explain what happened in the former Soviet Union? One would ordinarily have imagined that the end of the Cold War would have led to the dismantling of the army and the KGB and rebuilding the factories, but in fact what happened was precisely the other way around. This is just an extreme example of what has been happening everywhere. Economically, the apparatus is pure dead weight; all the guns, surveillance cameras, and propaganda engines are extraordinarily expensive and really produce nothing, and no doubt it’s yet another element dragging the entire capitalist system down—along with producing the illusion of an endless capitalist future that laid the groundwork for the endless bubbles to begin with. Finance capital became the buying and selling of chunks of that future, and economic freedom, for most of us, was reduced to the right to buy a small piece of one’s own permanent subordination.

  In other words, there seems to have been a profound contradiction between the political imperative of establishing capitalism as the only possible way to manage anything, and capitalism’s own unacknowledged need to limit its future horizons lest speculation, predictably, go haywire. Once it did, and the whole machine imploded, we were left in the strange situation of not being able to even imagine any other way that things might be arranged. About the only thing we can imagine is catastrophe.

  To begin to free ourselves, the first thing we need to do is to see ourselves again as historical actors, as people who can make a difference in the course of world events. This is exactly what the militarization of history is trying to take away.

  Even if we are at the beginning of the turn of a very long historical cycle, it’s still largely up to us to determine how it’s going to turn out. For instance: the last time we shifted from a bullion economy to one of virtual credit money, at the end of the Axial Age and the beginning of the Middle Ages, the immediate shift was experienced largely as a series of great catastrophes. Will it be the same this time around? Presumably a lot depends on how consciously we set out to ensure that it won’t be. Will a return to virtual money lead to a move away from empires and vast standing armies, and to the creation of larger structures limiting the depredations of creditors? There is good reason to believe that all these things will happen—and if humanity is to survive, they will probably have to—but we have no idea how long it will take, or what, if it does, it would really look like. Capitalism has transformed the world in many ways that are clearly irreversible. What I have been trying to do in this book is not so much to propose a vision of what, precisely, the next age will be like, but to throw open perspectives, enlarge our sense of possibilities; to begin to ask what it would mean to start thinking on a breadth and with a grandeur appropriate to the times.

  Let me give an example. I’ve spoken of two cycles of popular movements since World War II: the first (1945–1978), about demanding the rights of national citizenship, the second (1978–2008), over access to capitalism itself. It seems significant here that in the Middle East, in the first round, those popular movements that most directly challenged the global status quo tended to be inspired by Marxism; in the second, largely, some variation on radical Islam. Considering that Islam has always placed debt at the center of its social doctrines, it’s easy to understand the appeal. But why not throw things open even more widely? Over the last five thousand years, there have been at least two occasions when major, dramatic moral and financial innovations have emerged from the country we now refer to as Iraq. The first was the invention of interest-bearing debt, perhaps sometime around 3000 bc; the second, around 800 ad, the development of the first sophisticated commercial system that explicitly rejected it. Is it possible that we are due for another? For most Americans, it will seem an odd question, since most Americans are used to thinking of Iraqis either as victims or fanatics (this is how occupying powers always think about the people they occupy), but it is worthy of note that the most prominent working-class Islamist movement opposed to the U.S. occupation, the Sadrists, take their name from one of the founders of contemporary Islamic economics, Muhammad Baqir al-Sadr. True, much of what has since come to pass for Islamic economics nowadays has proved decidedly unimpressive.36 Certainly in no sense does it pose a direct challenge to capitalism. Still, one has to assume that among popular movements of this sort, all kinds of interesting conversations about, say, the status of wage labor must be taking place. Or perhaps it’s naïve to look for any new breakthrough from the puritanical legacy of the old patriarchal rebellion. Perhaps it will come out of feminism. Or Islamic feminism. Or from some as yet completely unexpected quarter. Who’s to say? The one thing we can be confident of is that history is not ove
r, and that surprising new ideas will certainly emerge.

  The one thing that’s clear is that new ideas won’t emerge without the jettisoning of much of our accustomed categories of thought—which have become mostly sheer dead weight, if not intrinsic parts of the very apparatus of hopelessness—and formulating new ones. This is why I spent so much of this book talking about the market, but also about the false choice between state and market that so monopolized political ideology for the last centuries that it made it difficult to argue about anything else.

  The real history of markets is nothing like what we’re taught to think it is. The earlier markets that we are able to observe appear to be spillovers, more or less; side effects of the elaborate administrative systems of ancient Mesopotamia. They operated primarily on credit. Cash markets arose through war: again, largely through tax and tribute policies that were originally designed to provision soldiers, but that later became useful in all sorts of other ways besides. It was only the Middle Ages, with their return to credit systems, that saw the first manifestations of what might be called market populism: the idea that markets could exist beyond, against, and outside of states, as in those of the Muslim Indian Ocean—an idea that was later to reappear in China with the great silver revolts of the fifteenth century. It usually seems to arise in situations where merchants, for one reason or another, find themselves making common cause with common people against the administrative machinery of some great state. But market populism is always riddled with paradoxes, because it still does depend to some degree on the existence of that state, and above all, because it requires founding market relations, ultimately, in something other than sheer calculation: in the codes of honor, trust, and ultimately community and mutual aid, more typical of human economies.37 This in turn means relegating competition to a relatively minor element. In this light, we can see that what Adam Smith ultimately did, in creating his debt-free market utopia, was to fuse elements of this unlikely legacy with that unusually militaristic conception of market behavior characteristic of the Christian West. In doing so he was surely prescient. But like all extraordinarily influential writers, he was also just capturing something of the emerging spirit of his age. What we have seen ever since is an endless political jockeying back and forth between two sorts of populism—state and market populism—without anyone noticing that they were talking about the left and right flanks of exactly the same animal.