Saturday, October 1, 2016
Week 7: Credit, Debt, and Humanity
In "Debt", David Graeber challenges traditional histories of money (the evolution from barter to money to credit). What are some of the contradictions in our thinking about debt/credit that Graeber makes visible in chapters 1 and 11? What is the morality around credit/debt (chapter 1)? What are the alternative histories of credit arrangements at the time of the rise of capitalism as a dominant economic structure (chapter 11)?
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Reading Graeber’s challenges of the evolution of money is very interesting after having read multiple cultural approaches to the traditions of gift giving and the phenomena associated therein. Graeber discusses the ways credit and debit are often approached on a personal level—a lot of trust is involved in these kinds of transactions. Even within gift giving, when reciprocity is present, the person who has received the gift is indebted to return the favor; the same can be said of transactions made based on credit. Graeber gives example of one medieval town or culture that would commonly base payments on tabs of credit, so cash was rarely exchanged except for individuals who were notoriously in financial trouble or were known for their trickery. The same can be said to be true in a capitalist society today, a person with no credit, or very poor credit, will have a very difficult time finding a banking institution accept them for a credit card, or in the same way, a loan. Graeber mentions that although lending institutions are existent to make money off other’s poor money management, there is risk involved in every loan, the cause for many loan requests to be denied. The morality following credit and debt then, follows along the same lines. People often feel obligated to help out their friends and family in times of need, and those people who are the borrowers are then morally obligated (usually) to return the payment. In most cases, ‘one must pay one’s dues,’ (filing for bankruptcy is another issue altogether).
ReplyDelete'Money is money and a deal's a deal'. Balance, penalty and rate of interest are the main considerations while calculating debt. However, Graeber, from the moral and human perspective focuses on part of the history which mostly remains untold. Commercial banks and later IMF provided huge amounts of money to the low-income countries governed by dictators or weak government. The money lenders knew there is obvious risk of getting their money back, yet they also confirmed it that the borrowing government would reimburse the loan even at the cost of peoples lives. The case of Madagascar rightly points on the moral side of loan repayment where government had to cut budget in mosquito eradication and accepted deaths for loan repayment. How much we are embedded to the notion that borrower has to pay his/her debt by any means comes out when we just scheme through the defaulter country category and think these countries 'failed' to repay loans. Instead, the analysis should consider the political economic history and take into account that such countries were once invaded and affected by Europeans to whom they owe the money now.
ReplyDeleteIn the similar vein, Graeber draws the connection between violence and debt. In other words, creditors are usually in a higher socioeconomic position from where they can apply violence legitimately upon the debtors. This imbalance of power and status is reflected through historical myths, laws and whole dynamics of debt and credit. Irony is, as Graeber notes, the society accepts this version of flawed interpretation which has further consequences.
If someone wants to take money from someone/institutions, s/he is not only becoming a debtor to that creditor, but also to ‘morality’. Question is ‘does the morality work for everyone equally or it has a class preference?’ David Graeber, in the book ‘Debt’ asked different questions challenging the social and moral structures working mostly for the creditors against the debtors across place, nation and time. Before addressing the issues of morality conjoined with debt, let us try to point out if there are any contradictions related to the entire process of debt. Firstly, throughout the history, as Graeber pointed out, creditors are/were positioned above the debtors. This, eventually works as an instrument to maintain the economical control on the poor people of a society. For maintaining so, creditors often had followed direct/indirect coercion of violence, religion etc. Secondly, does anybody actually understand the meaning of debt itself? How does it work? Why one needs to pay to the creditors? Theoretically that sounds logical, but what actually is the degree of similarity of this theoretical definition of debt and interest and how it goes on in reality? A sheer obscureness around the process of debt has made so much powerful as an instrument of economic exploitation. Thirdly, (financial) institutions who provide debt rarely act in rational way. They are more interested to invest wherever a profit can be made. Thus, lending money to different warlords of different war prone countries/ corrupt leaders of developing countries have made it more questionable. Sadly, these institutions had never been to accountable to anyone! Neither in past, nor in present.
ReplyDeleteWhile talking about morality, Graeber brought different issues which cannot be overlooked. The central line around which arguments of Graeber evolved is ‘money is money and a deal is a deal’. Once you have opened a deal, you have to make it, no matter how hard the situation. If you need to become a concubine/prostitute, so be it, but you have to repay the money, no matter what. The example of the dynamic of Brahmins and low-castes and the system of borrowing money for daughter’s marriage can turn the daughter herself a concubine and prostitute. And it was how it was as there was no ‘feeling of injustice’ around. This example Graeber gave form Galey’s study makes me think debt as a vicious cycle, no matter how hard you try it, you cannot go beyond it. You can turn into a bondage labor or a sex slave, but you have to return that. This process, historically, has totally ignored the physical, mental and social consequence of the debtor. Debt and its vicious cycle like facet also resembles the high amount of ‘student loan’ in the USA. Even the student dies, his/her family has to repay the loan, there is no escape from it rather it can fall on your next generation. The example of the Brahmin-low-caste debt relation can be altered with the other example of Graber where we saw a differentiated treatment of debtors in jail according to the socio-economic class in the society. Thus, question of morality, just like debt, will go against you if you do not belong to the high class of your society!
Graeber provides the O.E.D. definition of "debt" at the beginning of his work. The 3rd definition states: "a feeling of gratitude for a favor or service" (Note that feeling is underlined as I will jump back to the definition in a moment). This sparked interest because Graeber talks about the phenomenon that debt being repaid is a must.He mentioned that lenders charge interest and the debtor finishes their payments after repaying 3 times as much owed.
ReplyDeleteSo the question now begs itself, at what point do I no longer feel, gratitude for a service? I Know the answer to that question varies person to person but the question now is, if I have been paying back money for 9 months with interest and the total has already begun to surpass my original loan, why should I keep paying the last 9 months?
This is where the connection to credit comes. Since the time of Empires, exchange has been heavily based on this trust built through credit. Only poorer people were using cash because a line of credit would not be opened for them.
When it comes to morality, a private lender like myself to a friend would go as far as paying the money owed and maybe a little extra or another returning a favor as a sincere, thank you for helping out. When dealing with institutions that like to keep the poor worse off than before, the morality goes as far as playing the game. So the reason I keep paying the 9 more months of interest is because it will affect my credit. If I don't pay my credit is bad and if I do keep paying it, my credit gets higher and the more I do this the higher my status is. When in a society where credit is the system of power, our morals have to tailor to that field. Graeber mentioned that some people believe that those who lend professionally are demons. The morals of demons are absent as are those who "slaughtered a number of Malagasy who objected too strongly" to the ones owed.
Morals were forgotten at the beginning concept of credit when it was said that credit can only be built on debt, and you must have credit to get the essentials when starting an adult life like housing, private transportation, and what have you. The system is corrupt because they seek out and feed on those who most likely will stay in debt.
Morality is very warped when it comes to credit and debt. Failure to pay debts could cause jail time, even death. Credit may be upheld by crime, as desperation forces people to do anything that will get them out of a situation. This is especially common when the deal exists between two things that are not equal, such as a person vs. a bank. The dominant power can use coercion and intimidation to get their end of the transaction. As Graeber says: "If you end up having to abandon your home and wander in other provinces, if your daughter ends up in a mining camp working as a prostitute, well, that's unfortunate, but incidental to the creditor."
ReplyDeleteCredit arrangements during the rise of capitalism took many forms: an interesting one was government debt; this created the Bank of England. The King used this to pay off his war debt, offering the banks a monopoly. Hernan Cortes was deeply in debt, which inspired him to do an expedition to Latin America. So much death and destruction was the result of debt by the conquistadors. In addition, chattel slavery was encouraged by credit arrangements, and payment would be in the form of slaves, sometimes coming down to the seller offering their family and themselves. Morality plays a glaring role in the last two examples, illustrating how debt and credit can cause people to do unspeakable things.
"Maybe any sense of owing... is a form of debt."
ReplyDeleteThis may seems very obvious, but I think it underlies a crucial element of Graeber's argument. I appreciate the way he traces the logic of this, making the claim that one could argue that debt is the basis of morality. This seems to run in a similar intellectual vein as Mauss's analysis of reciprocity, but, it is not as limited by the equality mandated by reciprocity. The story of the missionaries and their patient seems very apt here, as it is not reciprocity that binds them together, evidenced by the refusal of the man to give the missionaries a present, but debt, which the missionaries were simply ignorant of. I think we could consider reciprocity not the source of morality, but one of the ways )perhaps the chief way) that we repay our debts, as it is that sense of owing which drives us. Even this does not necessarily simplify the issue of debt, as this "sense of owing" inhabits every sphere of social living, meaning that even "simple" monetary debts can be much more, tangled in a web with political, religious, or even other monetary debts depending on the context.