Creditocracy and the Case for Debt Refusal

**
Readings:
1. Ross, Andrew (2014), Creditocracy or Democracy?, Al Jazeera America,
10/05/2014
2. Strike Debt (2014), Introduction to the Debt Resister’s Operations Manual,
Oakland: PM Press.
3. Ross, Andrew (2014), Introduction in Creditocracy and the Case for Debt
Refusal, New York and London: OR Books; pp.: 9-29.
Note:
Andrew Ross invites the seminar participants to peruse at will the Debt
Resister’s Operations Manual, which is available online at the following link:
http://strikedebt.org/drom/#toc  

Creditocracy or democracy?
High levels of indebtedness aren’t just a drag on the economy; the
costs to popular sovereignty are much greater
by Andrew Ross
Source: http://america.aljazeera.com/opinions/2014/5/credit-carddebtclassoccupycreditocracy.
html
In the 1970s and 1980s, developing countries got caught in a “debt trap” laid
by Northern banks and creditors. Rather than enjoying credit that might aid their
development, they were condemned to an eternity of debt service payments.
Despite international efforts to promote debt forgiveness, most of them are still
trapped, and have as a result become either failed or dysfunctional democracies
because they are forced to prioritize debt repayments to foreign borrowers over the
needs of their own people.
In the past decade or so, the debt trap has migrated to the North. Sovereign
nations in the eurozone, revenue-strapped municipalities, public transit authorities
and struggling households are all forced to borrow simply to meet their obligations
to creditors. The formula used to trap personal debtors today is much the same as
the International Monetary Fund’s formerly controversial lending arrangements to
poor countries — loan installments are made so that borrowers can service existing
debts, while the principal is rolled over. With average incomes stagnant or falling,
households have no alternative but to follow the same path. The likely consequence
is that they end up performing a lifetime of debt service to the banks.
As I argue in my book “Creditocracy and the Case for Debt Refusal,” this is how
our financialized society works: The goal is to keep debtors on the hook for as long as
possible, wrapping debt around every possible asset and income stream to generate
profit. After all, if we pay down our debts entirely, we are no longer reliable sources
of revenue for the banks.
“The size of some of these [financial] institutions becomes so large that it
does become difficult for us to prosecute them.”
U.S. Attorney General Eric Holder
We are now well into the sixth year since the financial crash, yet every week
still brings fresh headlines about malfeasance, fraud and extortion on the part of the
finance industry. The cumulative record of scams is long and grisly: the collusion of
bankers in LIBOR rate fixing, their pseudo-forgiveness of phantom debt, their rigging
of municipal bond markets, their pursuit of illegal foreclosures, their payment
protection insurance ripoff and the mendacity of their collection agents. As crooked
as these practices are, it is clear that our elected officials are simply not able to bring
the perpetrators to justice. Indeed, Attorney General Eric Holder publicly
acknowledged the “too big to jail” doctrine in Senate testimony last year, when he
observed that “the size of some of these institutions becomes so large that it does
become difficult for us to prosecute them.”
Over the same period, we have seen a brisk increase in the number of debtors
being sent to jail for traffic fines and other minor infractions. It appears that
“debtors’ prisons,” first abolished in some U.S. states in the 1820s but not declared
unconstitutional until the 1970s, have been staging a return all across the country.
We are fast becoming a society in which the largest institutional swindlers are
protected from prosecution while those struggling to pay their bills are criminalized
and put behind bars.
‘Odious’ debt
In the absence of penal punishment, those who cannot pay are faced with
harsh moral censure. Creditors rely on this payback morality to enforce their claims,
and it is a deeply ingrained mentality. Civilization will crumble, we are led to believe,
if people break their obligations to make creditors whole. But clearly, some debts are
illegitimate, or predatory in nature, and probably should not be honored. For the last
15 years, advocates in the Jubilee South movement have campaigned, with some
success, for cancellation of the external debts of developing countries. They have
developed moral and legal arguments to distinguish between loans that were clearly
advantageous to these societies, and loans that benefited only the creditors or
inflicted social and environmental damage on families, communities and national
sovereignty. The internationally recognized legal category of “odious” debt pertains
to loans taken on by dictators and whose costs should not be passed on to the
citizenry. But there are also other criteria, relating, for example, to the doubledealing
of kleptocratic officials, that have been used to determine whether the loans
were really needed, or whether their terms were negotiated with an eye on private
profit rather than public welfare.
It’s easy to understand why taxpayers would balk at footing the bill when the
sour outcomes of private speculation get repackaged as public debt, as happened
after the bank bailouts, or when dodgy loan products are sold to credulous officials
by hedge fund managers. These are questionable obligations to pass on to the
electorate, and they probably should be reviewed through a citizens’ debt audit to
see which ones stand up and which do not. But should personal loans be subject to
the same line of moral inquiry? Are these debts not taken on voluntarily and in full
knowledge of the consequences? The answers are not as simple as they seem,
especially if they are guided by moral scrutiny of the creditors’ conduct.
Permanent indebtedness
The subprime scandal revealed the predatory basis of lending to those who
could not make ends meet. The same kind of attitude dominates the landscape of
fringe finance, where payday lenders, check cashers and other poverty banks all
thrive on usurious interest rates. Making loans that clearly can never be repaid may
be a more delinquent act than being unable to pay. Nor is this a situation that
applies only to shaking down the working poor. In the past two decades, the
condition of permanent indebtedness has penetrated deeply into the middle class,
where creditors are knowingly creating debt traps in hopes of turning us all into
“revolvers”: the kind of debtors who cannot ever clear the monthly balance but who
pay the minimum, along with late fees and penalties, ensuring a steady flow of
revenue.
Most problematic of all are the debts incurred to finance our access to vital
social goods — education, health care, shelter and public infrastructure. For most
people, these are existential and unavoidable, and are not the result of discretionary
choices. Moreover, they could be classed as antisocial debts, because they eat away
at the foundations of society. More than 60 percent of U.S. bankruptcies arise from
medical debt, and these numbers have not fallen off in Massachusetts since the
prototype of Obamacare was installed in that state.
Debts are, quite literally, the wages of the future.
Student debt, liberally offered to young adults who are not old enough to
drink, is touted as the obligatory price to pay for access to a decent, but ever more
elusive, job in the knowledge economy. Requiring young people to forfeit an
increasingly larger chunk of their future income simply to prepare themselves for
employment has been compared to indenture, though it may be more accurate to
describe it as a kind of wage theft that lenders, both public and private, wittingly
engage in. Debts are, quite literally, the wages of the future.
Our national economic managers are vexed by the prospect of generations of
overindebted graduates who will not be able to buy a house, raise children or
purchase big-ticket consumer items. But the larger threat is to the workings of an
operational democracy. A crushing debt burden stifles our capacity to think freely,
act conscientiously and fulfill our democratic responsibilities. Too many young
people now feel their future has been foreclosed before they have entered full
adulthood. And, given the creditors’ goal of prolonging debt service to the grave, the
burden of repayment is shifting disproportionately toward the elderly (many of
whom now are routinely asked to cosign student loans). Democracies don’t survive
well without a functional middle class or a citizenry endowed with an optional
political imagination, and the test of a humane one is how it treats seniors when
they outlast their capacity to earn a living wage.
High levels of indebtedness are typically seen as a drag on the economy, but
the costs to democracy are much greater. What share of responsibility lies with Wall
Street, or with a government that is so beholden to bankers that it cannot protect, or
provide relief to, its citizenry? Figuring out which debts we can legitimately refuse
may turn out to be the only way of salvaging popular democracy. The titans of the
finance industry will pronounce any talk of economic disobedience to be thoroughly
unethical, but perhaps they are the last people to be preaching about morality.
Andrew Ross is an NYU professor and activist with Strike Debt. He is the author
of “Creditocracy and the Case for Debt Refusal.”
The Debt Resisters’ Operations Manual.
Introduction
Debt Rules Everything Around Me
Everyone is affected by debt, from people taking out payday loans at 400%
interest to cover basic living costs, to recent graduates paying hundreds of dollars in
interest on their students loans every month, to working families bankrupted by
medical bills, to elders living in “underwater” homes, to the teachers and firefighters
forced to take pay cuts because their cities are broke, to people in the global South
suffering due to their countries being pushed into austerity and poverty by structural
adjustment programs. Everyone seems to owe something, and most of us are in so
deep it’ll be years before we have any chance of getting out—if we have any chance
at all. But few of us are asking, “Who do we all owe this money to, anyway?” and
“Where did they get the money they lent?”
To Whom are We Indebted?
Even among people drowning in debt, typical conversations around the subject
are framed in terms of personal responsibility: the debtors have no one to blame but
themselves for getting into this situation, and moreover, to not pay one’s debts is an
act of blasphemy, shame, and dishonor. To default is to expose one’s callous
disregard for all that is decent. Today, morality is bound to debt—the two are
inextricably linked. When we dispose of all the jargon attached to credit and debt,
we can see that at its core, a loan is essentially a bet on whether or not that
person—the debtor—will make good on their word. It is a risk, and that risk is higher
or lower depending on that person’s status in society (defined only in the most
narrow economic terms). A debt represents the willingness and ability of one to keep
their promise. But a person’s actual ability to repay is often out of their hands.
Frequently it depends on powers beyond their control. Debt further distorts our
basic perceptions of ourselves and others; not only is a person’s word on the line,
but also their value as a human being. In a way, we invest the value we place on
ourselves into that credit arrangement and into our relationship with debt. We
measure how and who we are as a human being and then bet on our
trustworthiness, our character. The subprime mortgage crisis is a particularly
egregious example of moralistic victim-blaming. Subprime mortgages were
concentrated in areas with higher racial segregation and targeted people of color,
yet some people blamed the victims of this financial disaster, often with racialized
language, proclaiming that, “those people shouldn’t have borrowed so much.”
Arguments such as these, however, ignore the whole history of the exclusion of
people of color from mainstream financial opportunities that could have led to
homeownership. In addition, when many people of color finally got access to credit
through legislative reforms, the lending was often predatory in nature. The effects of
the subprime mortgage crisis and the subsequent credit crisis resulted in the further
degradation of debtors’ social status. Edmund Andrews, the former economics
correspondent at the New York Times, tied the issue together quite well when he
reflected on his own credit troubles: “to see yourself plunged down to being a
debtor, the likes of which are being made fun of all over the place—it’s just an awful
experience” (Sington 2011). This statement makes clear what many already feel (and
fear): the debtor is seen as subordinate or somehow of less value than a non-debtor.
This is unfortunately held as a near-universal belief and many people are socially and
economically excluded because of it. Debt warps the way we look at each other and
encourages us to evaluate one another through a financial lens. Debt serves as a way
to classify people, to put them into hierarchies, and to separate and isolate them in
the process. Most of us have been brought up in a society where we are conditioned
to hold these beliefs dearly, and on the surface it all sounds reasonable. If you take
out a loan, you are obligated to pay it back. Focusing on debt at the individual level is
a common approach. However, it is insufficient for understanding debt as a system
and understanding why one would be right in resisting it. We have to go deeper by
examining the terrain on a structural level and explore the circumstances that have
put people (and municipalities and entire countries) into debt.
Debt and Income Inequality
Over three-quarters of us have some type of personal debt. At least 14% of
people living in the United States are already being pursued by debt collectors,
which is more than double from a decade ago. Are so many people really so reckless,
so irresponsible? Granted, total household debt has been on the decline since 2008,
but it is nevertheless still sitting at a whopping $11.31 trillion. Moreover, the median
debt amount has risen substantially over the past decade and a half. Contrary to
popular misconceptions, debt cannot simply be explained as the consequence of
financially irresponsible individuals acquiring luxurious items beyond their means.
Instead it is quite typically the outcome of people and families just trying to survive
under capitalism. Forty percent of indebted U.S. households use credit cards to cover
basic living costs such as rent, food, and utilities, and nearly half of indebted
households have accrued debt due to medical costs. Indeed, we are told to consume
to stimulate the economy and are subsequently demonized for accruing debt. In the
wake of any financial blip or disaster, politicians often implore people to spend
money for the sake of economic growth (remember that then-mayor Giuliani’s
advice to New Yorkers after 9/11 was to go shopping). After the financial crash,
however, we were told that we spent too much. According to a Consumer Reports
survey in 2009, over half of the respondents paid off credit card bills each month.
The remaining people accrued debt not by living large, but mostly by spending
money on health costs, transportation, and other basic needs. Many credit cardindebted
households making under $10,000 per year spend over 40% of that meager
income to pay off debt. Demos and the Center for Responsible Lending have also
debunked this myth of irresponsibility, stating, “the underlying reason behind some
households having higher levels of credit card debt than other households was the
occurrence of unforeseen events, such as job loss, medical expenses, or car
breakdowns.” There are myriad factors that explain these circumstances, but a good
place to start is by looking at economic trends over the past four and a half decades.
The actual value of the federal minimum wage reached its peak in 1968. Since then,
the real median hourly wage has basically stagnated, while labor productivity has
increased considerably. Notably, the average U.S. debt-income ratio doubled over
this same period, with average household debt beginning to exceed income in the
early 2000s.
If wages were to increase with productivity over the past fifty years, the
hourly minimum wage would be three times what it currently is, and median
hourly wages in the United States would be $27.87 instead of $16.07.
Of course, wage stagnation affects different populations with varying degrees
of severity. Compared to 1966, the wage increase for an overwhelming majority of
people in the United States averages only fifty-nine more dollars a year when
adjusted for inflation. The increase since 1966 for the top 10% of income earners in
our society, on the other hand, is over two thousand times this amount, and over ten
thousand times this amount for the top 1%! Looking just at the years since the 2008
financial crisis, the top 1% of incomes rose considerably as the bottom 99%
decreased. One-quarter of jobs in the United States pay below the poverty line for a
household of four. To make matters worse, job security has diminished over the past
few decades with many more jobs becoming casual, flexible, and temporary. The
shift from the manufacturing economy to the service economy has contributed to a
steep rise in precarious work—insecure jobs with low wages and no benefits (Fudge
and Owens 2006, 3-28). As any wage laborer knows, the power exercised over them
in the workplace is sometimes absolute. But in today’s unstable economy, where it’s
common to hear of people working more than one part-time job without benefits,
often just finding and keeping a job is a huge struggle. Today, even the ability to find
a job can be determined by one’s debt. Employers can view your credit reports to
determine whether or not you are “responsible,” and therefore “employable.” In
other words, prospective employers look to see whether or not your personal
circumstances will affect your work or if you have a history of being “financially
imprudent.” Credit scores are often the determining factor, and more will be
discussed about this in Chapter One. The extent to which people are affected by
precarity and wage stagnation is greatly informed by their gender, race, sexuality,
and ability. Women across the globe continue to comprise the majority of precarious
workers. On average, in the United States, women are paid less than men, and
women of color are paid even less. Median annual earnings for White men are
$45,542, while the median for White women is 71% of this amount, 61% for Black
women and only 51% for Latina women. For transgender people, rampant
discrimination often prevents hiring in the first place, and those who are hired
receive significantly less pay. They are much more likely than cisgender people
(those who do not identify as transgender or genderqueer) to make under $10,000
per year. According to the report “All Children Matter,” Children of gay or lesbian
parents are more likely than children with married straight parents to live in
poverty, and a disproportionate number of homeless youth are lesbian, gay,
bisexual, transgender, or queer (LGBTQ). Within the LGBTQ community, race and
gender contribute to further widening income gaps. Meanwhile, people with
disabilities in the United States are twice as likely to live in or near poverty than ablebodied
people. On average, they earn considerably less than what people without
disabilities earn. Compared to fifteen peer countries, the United States ranks secondto-
last—only marginally better than Australia—when it comes to this particular
income gap. Wage stagnation means people in the United States are finding it harder
and harder to afford basic necessities, so they turn to credit cards and end up paying
even more through high interest rates. As Kelly Gates observes, “The consumer
credit industry exploded at precisely the time when social welfare programs were
being dismantled and wages were stagnating for large numbers of people, with
consumer credit filling the widening gap between the wages people earned and the
personal expenses they accumulated in the new economy” (Gates 2010, 427). As the
evidence demonstrates, the situation is often even harder—due to income gaps and
a host of other factors which are in turn a result of structural oppression—for people
who are not White, male, able-bodied, cisgender, or straight.
Looking beyond income inequality
Income alone, however, does not illustrate the gravity of the situation. It is
more accurate to discuss wealth, or net worth—the amount someone owns minus
the amount that they owe. After all, the United States ranks 138th out of 141
countries in terms of wealth equality. Here the disproportionate impact on Black and
Latino/a people becomes even starker. The median household net worth is now
twenty-two times greater for Whites than it is for Blacks. One would hope that by
now at least some progress is being made, that the wealth gap is slowly closing, but
in reality the opposite is true. Wealth disparity is far greater now than it was about
two decades ago, when the wealth differed “only” by a factor of seven between
Whites and Blacks. Compared to three decades ago, the wealth gap has
quadrupled! Even when one looks at households with similar incomes, White
households consistently have a higher median net worth than Black and Latino/a
households. It is also true that, compared to Whites, Black and Latino/a families are
more likely to lose a home to foreclosure, a disproportion that becomes greater as
income increases. According to a recent study by the Institute on Assets and Social
Policy, “half the collective wealth of African-American families was stripped away
during the Great Recession due to the dominant role of home equity in their wealth
portfolios and the prevalence of predatory high-risk loans in communities of color.
The Latino community lost an astounding 67% of its total wealth during the housing
collapse.” The particularly severe impact of economic inequality on Black and
Latino/a people can be attributed to a long history of structural racism that
continues to exist in the form of, among other things, redlining (the denial of loans
or insurance to people of color) and reverse redlining (aggressively targeting
communities of color with predatory services). Discussing income exclusively is also
insufficient when talking about debt as it relates to age. Recently, a new type of loan
targeting the elderly known as pension advances has emerged. People sign over
their pension checks to companies in exchange for cash, but with interest rates that
can exceed 100%. People with a fixed income, such as those on Social Security, can
barely keep up with skyrocketing costs of living, but they’re still viewed as a golden
goose by creditors. The problem goes deeper than stagnant wages. While stagnation
has contributed greatly to people’s inability to get by and caused them to accrue
debt, simply raising wages would not prove to be an adequate solution. Namely, this
would ignore those without wages in the first place, including the millions of
unemployed people in the United States. And it’s worth pausing here to consider
what work gets identified as worthy of a wage, and the many kinds of vital labor that
have long been unpaid—labor that is done to create and maintain our lives and to
produce and sustain a workforce for profit-seeking enterprises. This work, when
performed for one’s own family and which includes child bearing and rearing,
cooking, cleaning, and elder care, is often referred to as “housework.” Some
feminists call it “reproductive labor” (Federici and Cox 2012, 36). (As women in
wealthier countries enter the paid workforce in larger numbers, others, primarily
immigrant women, are paid a measly sum to perform this domestic work—either in
addition to or at the expense of performing housework for their own families.) It’s
the invisible work that makes “traditional work”—that is, waged labor—possible.
Caring for others has traditionally been deemed “women’s work”—something which
women are supposedly naturally inclined to do for their own fulfillment. This, it
could be argued, has a lot to do with why this labor remains largely unwaged and
undervalued. The fact that some men perform reproductive labor doesn’t change
the fact that it’s still dismissed as “women’s work” and valued accordingly. If the
contribution of this work to the economy sounds negligible, imagine what would
happen if those performing reproductive labor went on strike. Any conversations
about the relationship between wages and debt need to take into account the very
nature of waged labor itself. There are other forms of unwaged labor as well,
including modern day slavery. The issue of unfree prison labor also requires our
attention. Global capitalism “thrives on the unwaged labor of millions of women and
men in the fields, kitchens, and prisons of the United States and throughout the
world” (Federici and Cox 2012, 31). To demand an increase in the minimum wage
would benefit a large segment of the U.S. population, but the situation would be
unchanged for most wageless workers.
Debt and Capitalism
Livable wages for all workers—including those who do not conform to
conventional notions of “workers”—would be a necessary first step toward freeing
ourselves from the debt system. But this approach, too, appears insufficient. We
have to ask ourselves: is our economic system adequately meeting people’s needs
and desires, or do we need to consider other ways of structuring a society? It is
under capitalism, after all, that corporations are obligated by law to maximize
profits. Unsurprisingly, then, corporate profits as a percentage of national income
are the highest since 1950, while workers’ incomes are at the lowest percentage
since 1966. Wall Street isn’t stealing workers’ wages and trammeling our ability to
lead dignified lives all on their own, though; legislators and politicians are complicit.
Only recently did it surface that taxpayers subsidize big banks around $83 billion per
year, a perk for which the financial industry has vigorously lobbied. Since 2008 and
also before, people have said that Wall Street ignored “systemic risk,” or the
interconnectedness of the financial system. This muddles the central problem: the
problem is systemic because the problem is the system. We know that those who
plan and profit from capitalism need us, but do we need them? An analysis of debt is
becoming increasingly relevant in the fight for justice. Economic exploitation and
oppression exist not only in the workplace. Through debt we feel this exploitation in
nearly all facets of our lives, from the houses we live in to the schools we attend to
the hospitals we rely upon. Yet the exploitation is often subtler, and therefore debt
requires more careful attention. As will be demonstrated throughout this book, all
aspects of the debt system maintain and exacerbate already existing social
inequalities, in the United States and internationally. Credit scores (see Chapter One)
are not only used in determining access to credit, but these quite arbitrary numbers
are impacting decisions regarding utilities, apartment rentals, car costs, insurance
rates, and even employment, among other things. Meanwhile in places where credit
is hard to come by—particularly in communities of color—a deregulated lending
market has set up shop with exorbitantly expensive products and services like
payday loans and check-cashing outlets (see Chapters Seven and Eight), ensuring that
the poor continue to get even poorer. And in the global South, the World Bank and
International Monetary Fund impose structural adjustment programs under the
guise of helping governments pay their debts (see Chapter Thirteen). It is against this
backdrop that Jamaica spends more than twice on debt repayment than what it does
on education and health combined. Among many African countries, the result of
structural adjustment is the privatization of land, the displacement of subsistence
farmers, the depletion of social services, a decline in life expectancy, an increase in
refugee populations, and the death of millions of people, to name just a few horrific
consequences of living under a global system that dictates paying one’s debts is
more important than life itself (Federici 2012, 84).
Debt as a social relationship, a weapon, and a form of control
People may feel like most kinds of debt—sometimes including their own
personal debts—are far removed from their lives or that they are too abstract to
understand. More often than not, technical terms surrounding debt serve to confuse
and scare people rather than educate and empower them. In the past, debt and the
language employed in its discussion have been used not only as a way to divide
those “in the know” from the rest, but also as tools of control and discipline in order
to limit and direct people’s life choices. Debt is a profoundly effective form of social
control, and, as many have argued, it has become the primary form of extracting and
accumulating wealth for the rich. Debt affects nearly every part of our lives. Not only
does it determine the material possessions in our lives, but it also shapes our
psyches. Debt is not something that exists outside of us, but rather something that is
central in forming our identities, characters, and our relationships. As demonstrated
earlier, debt is used as an oppressive financial tool that entangles class, race, gender,
sexuality, age, and ability. It exploits members of marginalized groups, plunging
them further into hardship. It is a strategy that impoverishes people and serves as a
stark reminder of the power differences in our society. Though the effects of debt
are felt across the social spectrum, debt does not “equalize” or make oppression
uniform. But as a form of control, it does force us to have similar, sometimes shared,
experiences, all of which define our self-perceptions and our relationships with our
neighbors. Perhaps the most notable aspect of debt is the asymmetry in power.
Creditors and Wall Street banks use financial markets, the power of the legal system,
and the power that comes with having political and economic clout to accumulate
staggering amounts of money. Preserving these privileged positions demands that
they issue credit and create vast populations of debtors, from whom they gain
commission, interest, and ultimately profit. This profit, like all profit, comes at a cost.
Not only is our labor the source of much, if not all, of their revenue, but they also rob
us of our future by demanding we work more to pay for ever-increasing interest
rates that balloon if we miss payment. Beholden to these financial institutions,
debtors are pushed to become complacent laborers. Of course, no one should
begrudge people for trying to make ends meet or provide for their families, but what
this relationship also deprives us of is an imagination of a world outside the creditordebtor
relationship. The ideas and experiences that fuel our imagination diminish,
and it becomes harder to fight for a better, more just world. As a weapon, debt
determines where we live, where and how we work, as well as our mental health.
From a young age, we are conditioned to feel that being in debt is shameful and
worthy of punishment. To offer a particularly poignant example, recently students at
a middle school in Massachusetts were deprived of eating cafeteria food for having
as a little as five cents of debt on their prepaid cards. The lesson is clear: debtors, no
matter their age or circumstances, don’t deserve to have their basic needs met. In
addition to being socially ostracized, debtors suffer from psychological problems that
often go unnoticed. Although there is strikingly little research in the United States
about debt’s impact on mental health, there are whole message boards filled with
people citing their debt as a source of their depression. We also see an increasing
number of people in the United States contemplating or committing suicide because
of debt. Deteriorating mental health and personal relationships are common among
debtors, as well as insomnia, anxiety, and a slew of physical and psychological
illnesses. These harmful effects can be amplified in an unstable economic climate
such as today’s. As if ushering us from one point in our lives to another, debt acts as
both a deterrent and catalyst. As a tool of capitalism that is used intentionally to
extract wealth from people, debt forces us to take more than one job and to quit
school or the things that give us an identity outside of work. Low-income students
are more likely to rely on loans to afford college. Faced with skyrocketing tuition,
these same students sometimes have to work many jobs to cover the costs. This
forces students to compromise their studies in order to work, which affects their
achievements and ultimately perpetuates class divisions. Debt is also used to shape
certain attitudes, behaviors, ideas, and actions. For instance, the criminal justice
system is seeing a dramatic rise in the number of indigent, or poor, individuals who
are incarcerated because of their debt. Once in prison, harsh measures dictate
prisoners’ entire lives, while simultaneously their forced manual labor floods our
economy with cheap goods and commodities. Although debtors’ prisons were
outlawed in the United States long ago, people are still imprisoned because they
can’t afford to pay fines for what are sometimes minor infractions. Once in the
criminal justice system, people are burdened with more fees that they cannot pay,
driving them further into debt. Prisons are continually filled with impoverished
people, giving life to a cycle of poverty and imprisonment that is hard to escape (see
Chapter Nine).
About Strike Debt
This operations manual is written by an anonymous collective from Strike
Debt. For over a year now, Strike Debt has been part of an international debt
resistance movement—developing tactics, resources, and frameworks for expanding
the fight against the debt system while developing alternative systems based on
mutual aid. Strike Debt emerged in New York City as an offshoot of Occupy Wall
Street in the wake of May Day 2012, receiving a great deal of inspiration from the
student strikes in Québec happening at the time. We soon expanded to organize
around all forms of debt. Chapters began popping up all over the country, including
in Philadelphia, Denver, Boston, the Bay Area, Chicago, and Raleigh. The group
operates under many principles that were adopted by Occupy participants from
other nonhierarchical movements across the world. These principles include political
autonomy, direct democracy, direct action, a culture of solidarity, and a commitment
to combating all forms of oppression. As we intend to demonstrate in this book,
Strike Debt believes that debt binds us all—though it binds some people (people of
color, queer and trans people, women, people with disabilities, and the poor) more
tightly than others. In addition to the creation of this manual, Strike Debt has
organized a number of initiatives and actions, such as the Rolling Jubilee. The Rolling
Jubilee purchases debt on the secondary market for approximately 1–5% of the
original principal and subsequently abolishes it. Other Strike Debt projects involve
debt education, hosting debtors’ assemblies, offering free health care, and
protesting hospital closings.
About this manual
The Debt Resisters’ Operations Manual (DROM) seeks to provide widely
applicable yet detailed information about debt as well as strategies for resistance. It
highlights our commonalities—namely, that people are not alone in their struggles
against debt—as well as our different relationships to debt. We strive to analyze
debt from many different angles, always maintaining a nuanced, critical analysis that
is conscious of race, gender, class, sexuality, age, ability, and their intersections. We
strive to write in simple language and will work to translate the manual into
languages other than English. A 120-page pamphlet version of the manual was
collectively researched and written in August 2012 as a contribution to
strengthening and expanding the debt resistance movement. Following its release in
September 2012, over twelve thousand copies were printed and distributed for free
within two months, from New York to Portland to Chicago to New Orleans. Digital
versions were read by tens of thousands more people. In order to reach out to a
wider audience and encourage more acts of debt resistance (and to avoid accruing
more debt ourselves through printing and distribution costs!), we decided to expand
the breadth of issues we covered in the pamphlet and publish this book with
Common Notions and PM Press. Although this edition is sold online and in
bookstores, we are committed to making the contents of the DROM available for
free to anyone who might need them. In both the earlier pamphlet and this book, a
decision was made to not attach any individual names to this manual. This decision is
rooted in our principle of collectivity. A large collective of people from all over the
country were directly involved in the researching, writing and editing of this book,
but moreover, this manual is an attempt to reflect, and explore further, the endless
conversations that have happened within Strike Debt over the past year. Whether
it’s collectively developing an analysis of debt as a form of social control or
contemplating particular strategies to resisting various forms of debt at meetings,
countless people have made essential contributions to the content of this manual in
both direct and indirect ways. People in and out of Strike Debt were invited to
participate in creating this book as much as they desired in various capacities—as a
researcher, writer, editor, coordinator, or various other roles. We also relied on
input from the larger Strike Debt group in determining what concepts and tactics
should be included in this manual. To ensure the group remained democratic,
contributors of the manual reached consensus on decisions that affected the overall
tone or structure of the book, such as the table of contents, the book description,
and a style guide to inform each chapter. Meanwhile, researchers and writers of a
particular chapter coordinated amongst themselves, while taking into consideration
concerns raised by other members. As stated in the original preface, the DROM is a
collective, living document; it remains open to revision and we invite constructive,
critical dialogue. From the original preface:
We don’t claim to have all or even most of the answers regarding debt. To
produce this manual, we have reached out to our networks to the best of our ability.
Some sections barely scratch the surface and in fact deserve their own book-length
treatment. Researching debt has uncovered many connections we didn’t expect, and
we know there are types of debt we haven’t addressed. It is our hope that readers
will have their own strategies to contribute to future versions of this manual. . . . Any
ideas, plans, tips, corrections, resources, schemes—legal or otherwise—should be
sent to DROM@riseup.net.
Since September 2012, we have received a tremendous amount of feedback
from fellow debt resisters as well as lawyers, accountants, and other experts, and we
have done our best to incorporate those suggestions into this edition. We have
expanded upon each of the original chapters and have written four new ones
(Chapters Six, Eleven, Thirteen, and Fourteen). We have endeavored to place greater
emphasis on strategies for collective action and alternatives to relying on the debt
system for meeting basic needs.
A General Outline, Chapter by Chapter
Talking about debt is difficult not only because it elicits raw, emotional
responses, but also because it’s a complex and intricate subject. On top of this, each
chapter of this book tries to provide you with pragmatic ways to fight back. This can
be anything from going through strategic bankruptcy to legal action to living off the
financial grid entirely. So, in order to avoid confusing the reader any more than they
already have been confused by credit card companies or student loan servicers, we
have tried to make this manual as accessible as possible. We guide the reader from
the “micro” forms of debt to the “macro,” or in other words, the types of debt
people directly experience everyday to the more abstract forms of debt that people
think about less, but nonetheless affect their everyday life. This manual begins, then,
with one of the manifestations of debt, of which many people are aware: credit
reporting agencies and credit scores (Chapter One). In the first chapter we explain
the role of credit reporting agencies (CRAs) and credit scores in people’s lives. In
Chapter Two we move on to credit card debt and automobile debt—two of the most
common forms of consumer debt. In this chapter we briefly explain the history and
role of credit cards, as well as provide a wider explanation as to why so many people
are reliant on credit to survive. Cars are the primary means by which most people
travel, yet most households cannot purchase and maintain them without incurring
debt. We then go on to medical debt (Chapter Three) and student debt (Chapter
Four)—two forms of debt that have become increasingly common in the United
States. Chapter Three lays out the current state of health care in the United States
and offers strategies for challenging medical bills. Chapter Four explains the ins and
outs of student debt, who profits from it, how you can survive with student debt,
and the fight for free higher education. In Chapter Five we take on housing debt—
the history and development of the housing bubble to its crash in 2008, as well as
the shady tactics employed by mortgagees to profit from low-income individuals’
misfortunes. We discuss our taxation system in Chapter Six, including an analysis of
who benefits and who loses out, as well as the financial distress taxes bring to some
of the more vulnerable people in society. We also, of course, discuss the IRS and how
it can affect you if you don’t pay your taxes. The next two chapters (Seven and Eight)
delve into the fringe finance industry: prepaid cards, check-cashing outlets, and
various forms of predatory lending geared toward the “unbanked” and
“underbanked”—those who live without mainstream bank accounts and those who
utilize both traditional and “alternative” financial services. In Chapter Nine, with
debt collection, we get into the more ‘abstract’ ideas surrounding debt. This chapter
will not only teach you about the debt collection industry, its dirty practices, and its
legal limits, but also how to fight back against harassment and intimidation from
collectors. If you are thinking about declaring bankruptcy, Chapter Ten might prove
useful. We discuss the different chapters of bankruptcy as well as the historical
development of debt forgiveness through bankruptcy. We also highlight the
circumstances under which bankruptcy is a wise or unwise strategy. Chapter Eleven
goes through some of the many ways you can live without necessarily being on the
“financial grid.” Recognizing that some people do or want to live without using any
of the financial services mentioned in the rest of the manual, we have provided
some strategies to living in the margins of this exploitative system. Municipal and
State Debt (Chapter Twelve) and National Debt (Chapter Thirteen) are affected by
each other and each affects individuals. In these chapters you will see how the
effects of sovereign debt crises and municipal budget cuts interrelate and penetrate
our individual lives. Chapter Fourteen, Climate Debt, discusses and analyzes how
climate change, industrial growth, and capitalism relate to one another, causing a
strict divide in the balance of wealth and power. This all paints a pretty bleak picture,
but it is not one without hope. The final chapter, Prospects for Change (Chapter
Fifteen), envisions a more mass-based approach to the individual and collective
problems this manual addresses and invites you, the reader, to critically engage with
the questions we ask in order build a grassroots debtors’ movement. Prospects for
Change features just some examples of successful debt resistance throughout the
world, and there are more to come. We try, and will keep trying, to imagine a world
free of exploitation, white supremacy, patriarchy, and all other forms of oppression
that set so many of us against each other. We encourage you to pass this book on to
your friends, neighbors, members of your community, and coworkers. We see this
book and the knowledge it collects as a tool that can be used to resist the debt
system that oppresses us. To come back to the original question of “To whom are we
indebted?” we should say that not all debt is bad. We are indebted to our friends
and communities who raise us, support us, and give us strength and a sense of
belonging and identity. Some debts keep up relations—important relations that help
us survive and make us human. There are many factors that make certain debts
immoral, however, like exploitation, force, violence, or profiteering. To the financial
establishment of the world, we have only one thing to say: we owe you nothing. To
our friends, our families, our communities, to humanity and to the natural world that
makes our lives possible: we owe you everything. Every dollar we take from a
fraudulent subprime mortgage speculator, every dollar we withhold from the
collection agency is a tiny piece of our own lives and freedom that we can give back
to our communities, to those we love and respect. These are acts of debt resistance,
which come in many other forms as well: fighting for free education and health care,
defending foreclosed homes against eviction, demanding higher wages, and
practicing mutual aid. The late (and not-so-great) British Prime Minister Margaret
Thatcher offered the world a stubborn acronym in defense of global capitalism and
the free market: TINA, there is no alternative. There are ceaseless attempts to force
us to believe this, to distrust others and keep our heads down, to discredit our
collective visions of another society, and to keep our dreams at bay. Witness the
ongoing militarization of society, the increase in police and state repression, and the
controlling of dissent in this country and others around the world. Meanwhile,
defenses of free market capitalism continue to be made with straight faces by
pundits and sycophants as our economic system seems to be on the brink of
collapse. Through the lens of debt, this book humbly offers a challenge to the logic of
TINA, to this assault on the radical imagination. Another world is not only possible,
but necessary.
References
• Associated Press. “Debt Stress Causing Health Problems, Poll Finds,” NBC
News, June 9, 2008.
• Bloomberg View Editorial Board. “Why Should Taxpayers Give Big Banks $83
Billion a Year?” Bloomberg, February 20, 2013.
• Bocian, Debbie Gruenstein, Wei Li, and Keith S. Ernst. “Foreclosures by Race
and Ethnicity: The Demographics of a Crisis.” Center for Responsible Lending,
June 18, 2010.
• Burns, Crosby. “The Gay and Transgender Wage Gap.” Center for American
Progress, April 16, 2012.
• Buchheit, Paul. “America Split in Two: Five Ugly Extremes of Inequality.”
Common Dreams, March 25, 2013.
• Bureau of Labor Statistics. “The Employment Situation—January 2013.” U.S.
Department of Labor, January 2013.
• Conference Board of Canada. “How Canada Performs: Disabled Income.”
January 2013.
• Consumer Reports. “Users with Growing Balances.” November 2009.
• Dearden, Nick. “Jamaica’s Decades of Debt are Damaging Its Future.” The
Guardian, April 16, 2013.
• DeFilippis, Joseph N., Susan Raffo, and Kay Whitlock. “Tidal Wave: LGBT
Poverty and Economic Hardship in a Time of Economic Crisis.” Queers for
Economic Justice, 2009.
• DeParle, Jason. “For Poor, Leap to College Often Ends in a Hard Fall.” New
York Times, December 22, 2012.
• Draut, Tamara, Ansel Brown, Lisa James, Kathleen Keest, Jabrina Robinson,
and Ellen Schloemer. “The Plastic Safety Net: The Reality Behind Debt in
America.” Demos and The Center for Responsible Lending, October 2005.
• Federal Reserve Bank of New York. “Quarterly Report on Household Debt and
Credit.” November 2012.
• Federici, Silvia. “War, Globalization, and Reproduction.” In Revolution at Point
Zero: Housework, Reproduction, and Feminist Struggle, 76–84. Oakland: PM
Press/Common Notions, 2012.
• Federici, Silvia, and Nicole Cox. “Counterplanning From the Kitchen.” In
Revolution at Point Zero: Housework, Reproduction, and Feminist Struggle,
28–40. Oakland: PM Press/Common Notions, 2012.
• The Flaw. DVD. Directed by David Sington. 2011; London, UK: Studio Lambert,
2012.
• Frank, Robert. “Wealth Gap Rises between Whites, Non-Whites.” CNBC.com,
June 22, 2012.
• Fraser, Steve. “The Politics of Debt in America.” Jacobin, February 4, 2013.
• Fudge, Judy, and Rosemary Owens. “Precarious Work, Women and the New
Economy: The Challenge to Legal Norms.” In Precarious Work, Women and
the New Economy: The Challenge to Legal Norms, edited by Judy Fudge and
Rosemary Owens, 3–28. Portland, OR: Hart, 2006.
• Gates, Kelly. “The Securitization of Financial Identity and the Expansion of the
Consumer Credit Industry.” Journal of Communication Inquiry 34, no. 4
(2010): 417–31.
• Gwynne, Kristen. “Middle School Forces Hungry Students to Throw Out Their
Lunches When They Couldn’t Pay.” AlterNet, April 5, 2013.
• Hatton, Erin. “The Rise of the Permanent Temp Economy.” New York Times,
January 26, 2013.
• Insight Center for Community Economic Development. “The Racial Gap in
Debt, Credit and Financial Services.” June 2009.
• International Metalworkers’ Federation. “Global Action Against Precarious
Work.” Metal World 1 (2007): 18–21.
• Jaffe, Sarah. “A Day Without Care.” Jacobin, April 2013.
• Johannsen, C. Cryn. “The Ones We’ve Lost: The Student Loan Debt Suicides.”
Huffington Post, July 2, 2012.
• Johnston, David Cay. “Income Inequality: 1 Inch to 5 Miles.” Tax Analysts,
February 25, 2013.
• Mason, J. W., and Arjun Jayadev. “Fisher Dynamics in Household Debt: The
Case of the United States, 1929–2011.” University of Massachusetts Boston,
Economics Department Working Papers, no. 13 (2012).
• Mishel, Lawrence, and Kar-Fai Gee. “Why Aren’t Workers Benefiting from
Labour Productivity Growth in the United States?” International Productivity
Monitor 23 (2012): 31–43.
• Movement Advancement Project, Family Equality Council, and Center for
American Progress. “All Children Matter: How Legal and Social Inequalities
Hurt LGBT Families.” October 2011.
• Mullaney, Tim. “More Americans Debt-Free, but the Rest Owe More.” USA
Today, March 21, 2013.
• Organisation for Economic Co-operation and Development. “Sickness,
Disability, and Work: Keeping on Track in the Economic Downturn.” May
2009.
• Orzechowski, Shawna, and Peter Sepielli. “Net Worth and Asset Ownership of
Households: 1998 and 2000.” U.S. Census Bureau, 2003.
• Saez, Emmanuel. “Striking it Richer: The Evolution of Top Incomes in the
United States.” January 2013.
• Schmitt, John. “The Minimum Wage Is Too Damn Low.” Center for Economic
and Policy Research, March 2012.
• Schwartz, Nelson D. “Recovery in U.S. Is Lifting Profits, but Not Adding Jobs.”
New York Times, March 3, 2013.
• Shapiro, Thomas, Tatjana Meschede, and Sam Osoro. “The Roots of the
Widening Racial Wealth Gap: Explaining the Black-White Economic Divide.”
Institute on Assets and Social Policy, February 2013.
• Shapiro, Thomas, Tatjana Meschede, and Laura Sullivan. “The Racial Wealth
Gap Increases Fourfold.” Institute on Assets and Social Policy, May 2010.
• Silver-Greenburg, Jessica. “Loans Borrowed against Pensions Squeeze
Retirees.” New York Times, April 27, 2013.
• Traub, Amy, and Catherine Ruetschlin. “The Plastic Safety Net: Findings from
the 2012 National Survey on Credit Card Debt of Low- and Middle-Income
Households.” Demos, 2012.
• Wicks-Lim, Jeannette. “The Great Recession in Black Wealth.” Dollars &
Sense, February 2012.
• Women Are Getting Even. “Who Is Affected by the Wage Gap?” 2004.
• Wu, Chi Chi, and Birny Birnbaum. “Credit Scoring and Insurance: Costing
Consumers Billions and Perpetuating the Economic Racial Divide.” National
Consumer Law Center and Center for Economic Justice, June 2007.

C REDI TOC R AC Y | 9
INTRODUC T ION
From April to June 2013, U.S. banks recorded their highest-ever
profits for a quarter—$42.2 billion. Even those who routinely
cheer every report of higher earnings had reason to pause. Maybe
this was one piece of upside financial news that should not be ballyhooed.
For one thing, the lion’s share of the profits went to just
six banks (Bank of America, Citigroup, Wells Fargo, JPMorgan
Chase, Goldman Sachs, and Morgan Stanley), all of them larger
and more powerful than they were before their institutional
greed helped to decimate the global economy in 2008. Five years
after the financial collapse, their capacity to operate beyond the
reach of regulators was even more apparent. On March 6, 2013,
U.S. Attorney General Eric Holder confessed to the Senate Judiciary
Committee that when banks acquire so much concentrated
power, it is “difficult for us to prosecute them … if you do bring
a criminal charge, it will have a negative impact on the national
economy, perhaps even the global economy.” Was it refreshing
or just plain alarming to hear the nation’s top law enforcement
10 | A NDREW ROS S
official frankly acknowledge how helpless he was in the face of
the “too big to fail” (now seen as too-big-to-jail) doctrine that
had served the bankers so well even as it caused a worldwide
depression?
Using international accounting rules, the combined assets
of the big six totaled $14.7 trillion (or 93 percent of U.S. GDP
in 2012), while the entirety of the country’s banking assets was
worth 170 percent of GDP. In Europe, the situation was even
more acute; Germany’s banking sector, for example, clocked in at
326 percent of national GDP, while the go-go U.K. banks were
at 492 percent.1 The exposure of American banks to derivatives
alone had increased to $232 trillion, almost a third more than
before 2008 when the escalation of these risky bets helped to
bring on the financial crash. Those figures are much more telling
than the ratio of overall national debt to GDP, though the latter
has commanded all the attention, and has been cynically and
unjustifiably seized on by deficit hawks as an excuse to crank up
the engines of austerity. Just as chilling was the news that the big
six U.S. banks collectively were carrying a debt load of $8.7 trillion.
With that combination of debt overhead, exposure to dodgy
derivatives, leverage over the national economy, and continued
weak regulatory oversight, there is a very high risk of a repeat of
the 2008 meltdown. Indeed, many industry insiders believe that
an equally ruinous relapse is already in the making.
Holder’s admission that the government lacked the wherewithal
to punish bankers for their widely publicized record of
C REDI TOC R AC Y | 11
extortion was a significant milestone, particularly for a democracy
that has long struggled to contain the damage inflicted by plutocrats
in its midst. The ability of Wall Street barons to hold the
government in thrall is nothing new.2 In a 1933 letter, Franklin
D. Roosevelt wrote: “The real truth of the matter is, as you and I
know, that a financial element in the large centers has owned the
government ever since the days of Andrew Jackson.”3 Owning
lawmakers may be a venerable prerogative for American financiers,
but the rise of a full-blown creditocracy is more recent.
Financialization had to creep into every corner of the household
economy before the authority of the creditor class took on a sovereign,
unassailable character.
In other words, it is not enough for every social good to be
turned into a transactional commodity, as is the case in a rampant
market civilization. A creditocracy emerges when the cost
of each of these goods, no matter how staple, has to be debtfinanced,
and when indebtedness becomes the precondition not
just for material improvements in the quality of life, but for the
basic requirements of life. Financiers seek to wrap debt around
every possible asset and income stream, ensuring a flow of interest
from each. Furthermore, when fresh sources of credit are
routinely needed to service existing debt (neatly captured in the
1990s bumper sticker, “I Use MasterCard to Pay Visa”),4 we can
be sure we are entering a more advanced phase of creditor rule.
For the working poor, this kind of compulsory indebtedness
is a very familiar arrangement, and has long outlived its classic
12 | A NDREW ROS S
expression under feudalism, indenture, and slavery. Each of these
systems of debt bondage were followed by kindred successors—
sharecropping, company scrip, loan sharking—and their legacy is
alive and well today on the subprime landscape of fringe finance,
where “poverty banks” operate in every other storefront on Loan
Alley. But the bonds created by household debt have also spread
upwards and now affect the majority of the population, tethering
two generations of the college educated. With total U.S. consumer
debt at a whopping $11.13 trillion (U.S. GDP in 2012 was
$15.68 trillion), 77 percent of households are in serious debt, and
one in seven Americans is being, or has been, pursued by a debt
collector.5 As for the beneficiaries, the tipping point for a creditocracy
occurs when “economic rents”—from debt-leveraging,
capital gains, manipulation of paper claims through derivatives,
and other forms of financial engineering—are no longer merely
a supplementary source of income, but have become the most
reliable and effective instrument for the amassing of wealth and
influence.
GR AND THEF T BANK ING
All of the available evidence, and much of our own experience—
whether we serve in high elected office or languish as empty-
handed targets of a collection agency—suggests that a fullblown
creditocracy is now in place, and it is distinct from earlier
forms of monopoly capitalism in which profits from production
dominated.6 There are many ways of illustrating this historic
C REDI TOC R AC Y | 13
development. Consider the balance of power between banks and
government. In 1895, J.P. Morgan was called upon to save the
U.S. Treasury from default (and again in 1907), but the shoe
was on the other foot by 2008, when the Treasury was forced
to bail out JPMorgan Chase, and few doubt that it would be
obliged to do so again in the future. The shift is also displayed in
how corporations make profits. Jumbo firms, like GE and GM,
which commanded the economy on the strength of their industrial
production, have become much more dependent for their
revenue on their firms’ respective finance arms. Companies are
no longer regarded primarily as worthy recipients of productive
loans for tangible outputs but as targets for leveraged buyouts,
to be loaded down with debt and ruthlessly used to extract
finance fees and interest. The difference between Mitt Romney’s
career, at Bain Capital, and his father’s, at the American Motor
Company, neatly summarizes this transition from industrial to
financial capitalism.7 As for ordinary individuals, we are now
under constant financial surveillance by the major credit bureaus
(Equifax, Experian, and TransUnion), whose credit reports,
scores, and ratings of our conduct as debtors control the gateways
to so many areas of economic need and want. Operating
outside of public oversight, these agencies answer only to the
requirements of the creditor class, and the profiles they assign
to us are like ID tags, marking our rank and class, in the present
and in the years to come, since they are used to predict future
behavior.
14 | A NDREW RO S S
We know that more and more of the 99 percent are suffering
from undue debt burdens—in the form of financial claims that
can never be repaid—but is it so clear who belongs to the class of
creditors? Following Margaret Thatcher’s promotion of “pension
fund capitalism,” the pension funds of workers have also been
drawn into the financial markets. Indeed, these funds now hold a
significant portion of the public debt, especially municipal debt,
currently being used as a justification for pushing through austerity
policies. In a formal and legal sense, the workers are creditors,
and they stand to lose if the debts are written off indiscriminately
in a bankruptcy proceeding. In accord with the “popular
capitalist” mentality encouraged by Thatcher and her neoliberal
successors, their investments, like all others, are exposed to risk.
Indeed, pension funds managers are forced to make highly speculative
investments to meet their long-term promises (as much as 8
percent in annual returns) to contributors, and so they entrust the
assets to Wall Street hucksters looking to charge inflated fees and
offload high-risk derivatives. Company pension funds are routinely
looted by corporate raiders, and state pension funds have
become an especially ripe target for employers or governments
in search of cash to balance their books, or assets to turn over to
hedge funds and private equity funds.
But the business of investing savings for retirement has little
bearing on workers’ primary identity as waged labor, though
contradictions clearly arise when the investments are handled
by Wall Street funds that inflict damage on workers’ interests in
C REDI TOC R AC Y | 15
general. Even if the annuities do turn out as promised, decades
hence, the recipients have not been generating their main income
from investment, as is the case for the principal beneficiaries of a
creditocracy. Workers who are part of the “real” economy, and
whose household debts have risen while their wages stagnated,
do not really inhabit the same world as the players who live off
unearned income in the undertaxed world of financial engineering.
Data analysis of the net transfer of wealth to the bona fide
1 percent creditors has shown how decisive the economic rents
are to the income of the latter and to their ownership of capitalism.
Extraction of these rents are the reason why this sliver of
the population has captured most of the income growth over the
last three decades and virtually all of it over the last five years.8
For sure, the diversification of pension funds and the growth
of 401(k) retirement plans mean that many more of us who do
productive work in the real economy are tied into the world of
finance than was once the case. But this circumstance has not
substantially altered our sense of being in the world, and it is far
outweighed by our ensnarement, like everyone else we know, in
the bankers’ debt trap.
Banks, brokerages, hedge funds, private equity firms, and
all the other entities that operate in the shadow banking system
have an interest in gathering influence and immunity for themselves,
but they are first and foremost tools of accumulation for
their owners, clients, shareholders, and direct beneficiaries. As
such, their business is to grab as much of the economic surplus as
16 | A NDREW ROS S
they can by keeping everyone else in debt, for as long as possible.
The build-up in all kinds of debt—sovereign, commercial, and
household—that led to the financial collapse has slowed in some
sectors—housing most notably—but the escalation continues in
the fields of healthcare, auto loans, and especially in education,
where the U.S. national aggregate will soon approach $1.2 trillion.
It is customary to lament that these obligations will never be
paid off. This prospect may be distressing to some, but that is
beside the point. Citizens of a creditocracy are not expected, nor
are they encouraged, to pay off all their debts. After all, we are
no longer useful to creditors if we somehow manage to wipe
the slate clean. The point is to prolong our debt service until
the bitter end, and even beyond the grave, as is the case for loan
co-signers. The sober truth is that debts, especially at compound
interest, multiply at a much faster rate than the ability to repay.
Original lenders are all too aware of this, which is why they sell
on the loans as fast they can.
Managing the lifelong burden of debt service is now an existential
condition for the majority, but what about its impact on
citizenship? How can a democracy survive when it is on the road
to debt serfdom? The history of the struggle for political liberty
is closely tied to the growth of credit. As James MacDonald has
argued, the democratic institutions of liberal societies were able
to survive and flourish because government bonds made it possible
to borrow cheaply, especially in times of war.9 But today’s
bond markets, which are globally networked and susceptible to
C REDI TOC R AC Y | 17
speculative bets from hedge funds, are more likely to “judge,”
“discipline,” and “reward” policymakers than to faithfully serve
their ends. Central banks increasingly act to ensure the solvency
of banks, and not sovereign governments trying to cope with
public deficits. The high and mighty presumption of creditors
to be made whole now routinely overrides the responsibility of
elected national representatives to carry out the popular will,
resulting in “failed democracies” all over the world. Even Mario
Monti, the placid technocrat appointed in 2012 as Italian prime
minister to dampen popular opposition to financial power, spoke
out against what he called the emergence of a “creditocracy” in
Europe. He was referring specifically to how sovereign governance
was being circumvented by the priority given to foreign
bondholders, as represented through the big German, French,
Swiss, and Dutch banks.
The fledgling civic republicanism of a country like the U.S.
ought to have fostered a moral economy of debt, ensuring fair
terms and treatment between lenders and borrowers, and equal
measures of protection when insolvency occurred. But creditors
have always been given the upper hand.10 In his day, Jefferson was
hardly alone in denouncing the predatory conduct of speculators,
and wishing for an end to the debt peonage that still plagued the
Old World. In particular, he considered it a natural right to be
freed of the debts of a previous generation, as “a salutary curb on
the spirit of war and indebtment. The modern theory of the perpetuation
of debt has drenched the earth with blood and crushed
18 | A NDREW ROS S
its inhabitants under burdens ever accumulating.”11 Yet the new
republic’s first order of business was to figure out who would foot
the bill for the Revolutionary War debts. Efforts to pass on the
costs in taxes to yeoman farmers provoked armed uprisings, first
in Shays’ Rebellion in central and western Massachusetts (the
insurgents closed courts and liberated debtors from prisons) and
later during the Whiskey Rebellion in eastern Pennsylvania.
The specter of Shays’ insurrectionary farmer-debtors was
one of the reasons why the framers hastened to adopt a constitution
that limited democracy and enshrined property protection
as the overriding function of government. As for the slavery
compromise reached by the delegates in Independence Hall, that
baneful outcome was not far removed from the circuits of debt
bondage that launched the slave trade in Africa, and from which
white property owners and their descendants in several nations
would continue to benefit. In the course of the nineteenth century,
the American ideal of republican independence was further
undercut by the experience of farmers’ mass indebtedness to Wall
Street banks, insolvency in the face of exorbitant and unpayable
demands, and imprisonment at the dictate of creditors. The lopsided
creditor-debtor relationship, reinforced by bankruptcy laws
that still overwhelmingly favor lenders, is one of the more grisly
illustrations of the gulf between the creed of political freedom
and the reality of American life.
The concern that political ideals are imperiled by debt servitude
is, of course, much older than the founding of the American
C REDI TOC R AC Y | 19
republic. The historical record shows that a society unable to
check the power of the creditor class will quickly see the onset of
debt bondage; democracies segue into oligarchies, credit becomes
a blunt instrument for absorbing more and more economic surplus,
and rents are extracted from non-productive assets. Are we
heading down this path, once again? Many commentators are saying
as much when they point to the revival of debtors’ prisons, or
condemn student debt as a form of indenture, or compare banking
practices, on Wall Street as well as on Loan Alley, to the most
extreme forms of usury. So, too, the revival of interest in a debt
Strike Debt digital meme, July 2012
2 0 | ANDREW ROS S
jubilee (or mass debt forgiveness) not only in developing countries,
but also in the global North, is evocative of macro-solutions hatched
in the ancient world by rulers who were so desperate to restore
the balance of popular power in their favor that they abolished
all existing debts, freed debt slaves, and returned land to original
owners.
This kind of talk is indicative of the extremity of the current
debt crisis. All the evidence shows that drastic relief measures are
needed, and that a new kind of non-extractive economy, benefiting
from what Keynes called the “euthanasia of the rentier,” ought
to be built. Pursuing that alternative path—to a society guided by
the productive use of credit—may be the only way of salvaging
democracy. But for establishment economists, even those who
question the credo of neoliberalism, there is no crisis, only a debt
“overhang” that needs to be reduced to manageable levels before
the normal pattern of debt-financed growth can reassert itself.
In the final chapter of this book, I show why there is no viable
return to that debt-growth formula. After incomes stagnated
in the 1970s, respectable growth rates could only be achieved
through a series of speculative asset bubbles. Each time the bubble
burst, we could see how the formula rested on an insubstantial
foundation. As far as lasting prosperity goes, it is fair to conclude
that much of the growth was fake, producing only phony
wealth, and that future efforts to inflate prices will end the same
way. But from an ecological perspective, there is little doubt that
this pattern is entirely unsustainable. There now exists a mounC
REDI TOC R AC Y | 21
tain of scientific evidence, beginning with the seminal 1974
report, Limits to Growth, which testifies to the calamitous impact
of GDP-driven growth on the biosphere. Restoring business as
usual, once that pesky “overhang” disappears, can only be a recipe
for eco-collapse.
As with any unjust social arrangement, a creditocracy has to
be stripped of its legitimacy in the public mind before its actual
hold on power is dissolved. How far along this road have we
come? Given the battering that bankers have taken over the past
five years, it’s a testament to their self-projected mystique that
they still command even a fraction of their standing as indispensable
members of society. Every other day brings a fresh headline
about their misconduct and profiteering, as swindle after swindle
is uncovered. The judicial investigations multiply, producing few
convictions (and only of junior employees), but an ever-longer
roster of fines, refunds, and other penalties. Some of the settlements
to end the criminal and civil charges are massive. By the
fall of 2013, JPMorgan Chase, for example, was in negotiations
with the U.S. Justice Department over a $13 billion settlement
for packing mortgage-backed securities with dodgy home loans.
Notably, less than $2 billion looked like it would be claimed in
fines and only $4 billion in relief for homeowners, while more
than $7 billion was being allocated for investors who suffered
losses.12 In any event, the profits of JPMorgan and its peers are so
large that such penalties are shrugged off as the cost of doing business.
Public trust, the crucial quality that banks have customarily
relied on in order to trade, has long been decimated; we have
2 2 | ANDREW ROS S
come to regard their ingenious financial products as little more
than scams, and we know that the bill for all of their risky conduct
will likely end up with us. Yet the banks retain their cachet
as institutions that are just too indispensable to reform, let alone
transform into socially beneficial entities, and most importantly,
their lobbying firepower ensures that legislators will always look
out for their interests.
In The Bankers’ New Clothes, Anat Admati and Martin Hellwig
argue that “there is a pervasive myth that banks and banking
are special and different from all other companies in the economy.
Anyone who questions the mystique and the claims that are made
is at risk of being declared incompetent to participate in the discussion.”
13 Finance, we are encouraged to believe, is too complex
for lay people to understand. One of the outcomes of this mystique
is that too many of us are trapped in the payback mindset.
Though we may be more and more aware of the irresponsibility
and fraud of big creditors who won’t pay their own debts, and
who offload all their risky loans to others, we still accept that it is
immoral to fail to repay our debts to them. Of course, there are
lawyers, courts, and police standing at the ready to enforce this
payback morality, and a ruined credit score to live with in the case
of a default. But these are instruments of coercion; they serve as
backups if the mechanism of consent falters. When the psychology
of the consenting debtor shifts, as it is now slowly doing,
from resignation to reluctance, and even to resistance, then the
authority of the creditors’ self-interested moralism begins to lose
C REDI TOC R AC Y | 23
its sway. Then, and only then, are we able to honestly question
whether we owe anything at all to people and institutions that,
were it not for the figment of the banker’s new clothes, would
rightly be seen as engaged in extortion.
ABOL ISHING THE DEBT SENTENCE
More public education is needed about how creditor rule is
upheld, and it is in that spirit that this book makes the case for the
refusal of household debts. When a government cannot protect
its people from the harms inflicted by rent extractors, and when
debt burdens become an existential threat to a free citizenry, then
the refusal to pay back is a defensible act of civil disobedience.
For those aiming to reinvent democracy, this refusal may be
nothing short of a responsibility. The case for debt cancellation
in developing countries has already been made by groups within
or allied to the Jubilee South movement.14 These advocates have
devised moral and legal arguments for repudiating the external
debts of governments, and have had some success in delivering
relief for some of the world’s poorest populations. Public debts
in the global North are now at the core of the austerity policies
being implemented from the battered periphery of the Eurozone
to the beleaguered cohort of ex-industrial cities like Detroit and
Baltimore. The process of questioning which of these debts is
legitimate—and deserving of repayment—and which are unfair
impositions—to be rightfully rejected—is already underway.15
Now is the time, as I argue in this book, to extend this process to
24 | A NDRE W ROS S
household debts, especially those taken on simply to gain access
to basic social goods.
In what follows, I summarize some of the arguments underpinning
the case for debt refusal. Most appeal to broad moral
principles, as opposed to quantifiable rules, but there is no reason
why these principles could not be applied in a way that would
produce some hard numbers:
􀁳􀀀 Loans which either benefit the creditor only, or inflict social
and environmental damage on individuals, families, and communities,
should be renegotiated to compensate for harms.
􀁳􀀀 The sale of loans to borrowers who cannot repay is unscrupulous,
and so the collection of such debts should not
be honored.
􀁳􀀀 The banks, and their beneficiaries, awash in profit, have
done very well; they have been paid enough already, and
do not need to be additionally reimbursed.
􀁳􀀀 The credit was not theirs to begin with—most of it was
obtained through the dubious power of money creation,
thanks to fractional reserve banking and the “magic” of
derivatives. The right to claim unearned income from
debts created so easily should not be recognized as binding.
􀁳􀀀 Even if household debts were not intentionally imposed as
political constraints, they unavoidably stifle our capacity
to think freely, act conscientiously, and fulfill our democratic
responsibilities. Economic disobedience is justified
as a protective deed on behalf of democracy.
C REDI TOC R AC Y | 25
􀁳􀀀 Extracting long-term profits from our short-term need to
access subsistence resources or vital common goods like
education, healthcare, and public infrastructure is usurious,
and should be outlawed.
􀁳􀀀 Each act of debt service should be regarded as a non-productive
addition to the banks’ balance sheets and a subtraction
from the “real” economy that creates jobs, adequately funds
social spending, and sustains the well-being of communities.
􀁳􀀀 Obliging debtors to forfeit future income is a form of
wage theft, and, if the debts were incurred simply to prepare
ourselves, in mind and body, for employment, they
should be resisted.
􀁳􀀀 Given the fraud and deceit practiced by bankers, and the
likelihood that they will not refrain from such anti-social
conduct in the future, it would be morally hazardous of
us to reward them any further.
The foregoing is not an exhaustive list, but it is a start, and I offer
it with an invitation to add others. Through the reasoned combination
of these moral arguments with more practical principles
of measurement, it will be possible to determine which debts
should be refused, and which should be honored. Most important
of all, debtors who stand together, with the spirited support of
a broad movement behind them, can make the strongest moral
case. Negotiating with creditors on an individual basis might win
some personal relief but will not alter, let alone supplant, the
norms of conduct that sustain a creditocracy.
2 6 | ANDREW ROS S
Once the public psychology around debt has decisively
shifted away from automatic compliance with payback morality,
how will the new mindset translate into action? When there is
no prospect of debt relief issuing from the government, debtors
will have to take it for themselves, and by any means necessary.
Millions default on their household debts annually, and are privately
punished for the outcome. A collective default, in the form
of a mass debt strike, seems unlikely from our current vantage
point, though there is little doubt it would have a sharp political
impact. Organizing around debt is not easy—each debtor’s situation
is like a fingerprint—but the conditions for the emergence of
a debtors’ movement have seldom been more auspicious.16 Even
though we cannot predict, at this point, what form it will take,
which pathways it will pursue, and which tactics it will adopt,
the need for such a movement is self-evident. For those who like
neat distinctions, the historical moment can be summarized as
follows. Whereas strife over wages was central to the industrial
era, the grand conflict of our times is shaping up as the struggle
over debt, and any just resolution calls for a level of organizing at
least as momentous as the labor movement in its heyday.
The rejection of existing illegitimate debts is not enough, of
course. Wiping the slate clean, in and of itself, will not alter the
continuing use of debt-leveraging to redistribute wealth upwards
and constrain democracy downwards. Debt cancellation is only
the first step. An alternative economy, run on socially productive
credit, has to materialize if the control over economic planC
REDI TOC R AC Y | 27
ning by Wall Street and other banking centers is to be decisively
loosened. To most people, that is a daunting prospect, because it
evokes some colossal overhaul of the current system that could
only be achieved through the capture of state power. Yet many of
the institutions and practices that support an alternative economy
already exist and are thriving in their own right. Mutualist, nonprofit,
commons-based, and community-oriented, their economic
impact is already much larger, in the aggregate, than is
generally acknowledged. Credit unions, workers’ cooperatives,
and community-supported agriculture are well established and
expanding in membership everywhere, while more experimental
practices involving time banks, social money, and community
currencies are being tried out in places, like Greece and Spain,
where the mainstream economy has collapsed. Building on these
existing commonist initiatives may be easier than halting the
neoliberal privatization of the public sector, but, for some social
goods—education, healthcare, infrastructure, and energy among
them—public provision is still critical. An alternative economy
should be a mixed one, public and commonist. Whatever the
ratio of the mix, there should be no place, and no need, for most
of the frenzied rent-seeking activity that feeds the financial services
industry.
A successor economy cannot sustain itself without new
forms of political expression and association. Historically,
creditors needed a representative government to ensure that
the citizenry would agree to the repayment of public debts:
2 8 | ANDREW ROS S
as borrowers, absolute monarchs had been fickle about their
obligations. “Since the Renaissance,” Michael Hudson
observes, “bankers have shifted their political support to
democracies. This did not reflect egalitarian or liberal political
convictions as such, but rather a desire for better security
for their loans.”17 Democratic governments proved to be
more reliable clients, though they still defaulted on sovereign
debts on a regular basis—more than 250 times since 1800,
according to one estimate.18 But today’s legislators are more
and more exposed as helpless in the face of creditors’ demands,
and incapable of checking the power of high finance over
policy-making. Too many younger people now see the current
exercise of representative democracy as a rotten end-game.
It has stopped being meaningful, and not just because of the
hijacking of power on the part of the creditor class. Younger
activists have been practicing democracy in different ways—
often labeled horizontalist—since the late 1990s. Leaderless
process in decision-making and action is now a default mentality
for at least one generation, as are the social customs of
cooperative networking and mutual aid.19 Perhaps we should
no longer refer to these as experimental practices, “prefigurative”
of a more humane future. Among the politically aware,
they have become quite normative, and are likely to work
their way into the main currents of civil society in the years
to come. When this happens, we will see if the impersonal
relations of money debt can actually be transformed into warm
C REDI TOC R AC Y | 29
social bonds—mutually nourishing debts, in other words, that
we owe each other in the exercise of our freedoms.
I am not an economist, and the financial knowledge I draw
on in these pages is not the preserve of a specialist. Much of
my understanding of credit comes from my self-education as a
participant in the debt resistance initiatives that emerged from
Occupy Wall Street and the other worldwide movements from
2011 onward. Moreover, this book is a work of moral commentary
and political advocacy, not academic analysis, though it does
rest on scholarly research. For example, I discuss the merits of
debt auditing, but do not offer advanced technical protocols for
determining which debts are illegitimate, and which should be
honored. That work still needs to be done, building on the moral
principles of repudiation laid out here. With few exceptions, the
book does not feature the voices or stories of debtors themselves;
they are readily available on the Internet, and elsewhere. But it
was directly inspired by the open expression of their cause—an
eloquent outpouring of pent-up woe, resentment, and solidarity,
widely seen as a coming-out moment for those no longer
silenced by the shame and guilt that is the debtor’s lot. Last, but
not least, the arguments advanced in these pages came out of the
shared discussion and direct actions of comrades in Strike Debt
and the Occupy Student Debt Campaign, who responded to the
moment.20 In that regard, it is a movement book, even though
the movement is still finding its voice, and feet.

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