Following the reading of Susanne Soederberg’s Debtfare States and the Poverty Industry by the Past & Present Reading group in the Department of Political Economy at the University of Sydney, the group put together “Ten Questions on Debtfare States”. In this fascinating exchange, Susanne Soederberg offers her answers to those questions to provide a unique vantage point from which to survey the contours of the landscape of the financial system today.
- In terms of the origins of the social power of money what does Debtfare States and the Poverty Industry tell us about the “who of power?” in relation to finance?
The ‘who of power’ in this case has two components: finance and the financial system. On the one hand, finance is comprised of money and credit. In Marxian terms, one of the paradoxes of capitalist power is precisely the ability of money to appear as a thing devoid of power. In other words, power takes an abstract form: in the realm of exchange the core components of finance – money and credit – conceal not only secondary exploitation but also the class-based relations between debtor and creditor. In this sense, the social power of finance is built into the way that exchanges between creditor and debtor appear as equivalent, natural and voluntary. Creditors, which I covered in the book, vary in size and range from Wall Street investment banks to family-run payday storefronts to retail banks (Banco Wal-Mart in Mexico) and development banks (German KfW development bank and the World Bank Group’s International Financial Corporation).
On the other hand, the financial system refers to the institutional, regulative and discursive influence on credit relations. In this sense, the articulation of power in the financial system indirectly frames creditor-debtor relations. The ‘who of power’ regarding the financial system involves not only above mentioned creditors, but also their creditors including private equity firms and large institutional investors such as pension funds (workers’ deferred wages and salaries). The financial system also includes states (at various scales of power), financial lobby groups, credit rating agencies, international organisations (both private and public), and the economic, accountancy, and legal professions, which have been designated by states and creditors to possess expert knowledge.
- To what extent have the disciplinary mechanisms of state-embedded consumer credit superseded Marx’s emphasis on labour productivity as the “most powerful lever of accumulation” in the reproduction of the surplus population?
The growing reliance of marginalised labour power on credit does complement the emphasis on labour productivity in the reproduction of the surplus population. Given the withdrawal of the state and corporations from social provisioning, access to expensive consumer credit performs roles that underscore the exploitation of labour within production. For instance, this constructed reality coerces surplus workers to pay for their subsistence needs thereby further individualising and commodifying survival strategies of surplus workers and their families. Subject to the powers of concrete abstractions of credit money (interest rates, payment schedules, etc.), indebted workers are compelled to submit themselves to the labour market to earn wages – under any conditions – not only to make timely payments on debt but also to meet household expenses. In the case of welfare recipients, this silent compulsion reinforces the demands of workfare provisioning that requires beneficiaries to augment their social wages with waged labour. With regard to underemployed workers – a significant population in many parts of the world – their indebted status translates into disempowerment with regard to their working conditions (no predictability in work schedules, lack of living wages, no benefits, employer abuse, etc.). This growing reliance of the working poor on consumer credit to supplement their living or social wages also doubles as an indirect subsidisation (corporate welfare) to employers.
- Has the rise of credit-led accumulation fundamentally altered what class means in modern capitalism? Put otherwise, to what degree does the normalisation of expensive credit displace the problems of class society that Marx describes, like poverty, wage suppression and unemployment, into a new sphere?
The short answer to this question is that many of the tensions of capital accumulation – which fall along class, gender and racial lines – have been displaced into the realm of exchange. The latter plays an important role in my narrative because it is where, as Marx notes, freedom, equality and Bentham reside. It is important to keep in mind that this transference, which occurs through the credit system, is not only temporary, though, but also serves to heighten the underlying contradictions throughout the processes of capital accumulation.
The long answer is that practices involved in this (continual) transference into the realm of exchange should be seen as a series of unstable spatio-temporal fixes aimed at overcoming barriers to capital accumulation. One such tension is the need to reproduce an industrial reserve labour army with as little public support as possible, whilst constructing this reality as normal, economic (devoid of politics) and natural. The regulative and rhetorical practices of debtfarism are vital in this regard, particularly in terms of manufacturing certain truths about class. Drawing on Doreen Massey, for example, class as well as gender and race have become subsumed under neoliberal vocabularies of the economy – and the realm of exchange, in particular – through the proliferation of a lexicon filled with clients, customers, choice, markets, self-interests, and individuals. This discursive practice, which is facilitated by debtfarism, serves to infiltrate and reshape relations between people into buyers and sellers of goods and services ranging from banking to education and welfare services.
The upshot of this is not only a distortion, and even erasure of more radical understanding of class, but also a rebounding of the above tension into the realm of exchange. According to the US Task Force on Middle-Class USA, which I discuss in Chapter Six, class has no material basis. It is instead represented as an (individualised) aspiration. No matter what you earn, you can be middle-class, if you work hard, continually upgrade your ‘skill-sets’, and save your money. Seen through the lens of Middle Class USA, for instance, the lack of living and social wages, growing levels of socio-economic inequality and so forth are rearticulated in terms of consumer protection through financial education and providing universal access to financial products and services.
- Your analysis of the contradictions of credit money refers extensively to David Harvey The Limits to Capital and particularly his assertion that ‘no matter how far afield a privately contracted bill of exchange may circulate, it must always turn to its place of origin for redemption’ (p. 34). In a global political economy of austerity where the public have had to ‘bail-out’ bankers across multiple sites (e.g. US, Eurozone crises), in what ways does Harvey’s assertion still hold up?
Bailouts demonstrate the constructed nature of the financial system, but bailouts are only offered to some while the very same states assiduously ensure that the disciplinary frameworks remain in place for other debtors. Allow me to explain this stance by way of two points.
First, given the gamble with future labour power entailed in the creditor-debtor relations, closing the circle (returning to the place of origin for redemption) is not always possible. After all, the very existence of bankruptcy laws, and their constant reformulation to shift the temporal landscape of debt relations, reveals that credit relations are not only unnatural but also that the agreement between debtor and credit are forfeited on a regular basis. What is clear from my study is that those that wield the power of money (certain states and corporations) have the privilege to postpone and change the terms of repayment. One example of this is the stark difference between debt relief in personal and corporate bankruptcy proceedings, which, once again, mirrors the class-based power in the financial system.
Second, government bailouts of the private sector (socialisation of debt) do not contradict Harvey’s insight. On the one hand, the government’s payment of private debt does not necessarily bring the transaction full circle for everyone. Take for example former homeowners in Spain, who are legally required to make mortgage payments well after their homes have been repossessed, despite the fact that the bailout banks have repackaged and sold this outstanding mortgage debt on secondary markets to debt buying companies (another important but understudied feature of debtfarism and the poverty industry). On the other hand, it is important to underscore the point that the ability of debtfarism in closing the transaction for creditors (banks, in this case) is vital for money to maintain its social power as the universal equivalent by ensuring that it can function as a trusted store of value.
- You describe the process of neoliberalisation as a ‘continual attempt to reconstruct’ the state along the ‘utopian premises of neoclassical economics’ (p. 52). In this view, are neoliberalism and neoclassicism synonymous?
While they are clearly related, they are not the same. Neoliberalism is the political, institutional and discursive extension of the core premises linked to neoclassical economics, which is ideological, fragmented (e.g., saltwater and freshwater schools) and disputed. That said, neoliberalism draws on the core premises of neoclassical economics to justify and depoliticise its policies – many of which legitimate the subsumption of the state to the social power of money in the form of monetarism and austerity politics.
Actually-existing neoliberalism is geographically and historically distinct, but its emphasis on individualism (and groups of individuals in the form of households), preference for private over public consumption, obsession with inflation and interest rates, market equilibrium, and utility maximisation by income-constrained individuals is evident in state intervention at all scalar levels (global, regional, national, and local) across the globe. Neoliberalism, as with its neoclassical ideological foundations, is not static but dynamic and uneven processes fuelled by what Jamie Peck and others refer to as fail forward strategies. As an integral feature of neoliberalism, debtfarism also undergoing constant experimentation as it aims to resolve contradictions in credit-led accumulation in and through the class relation therein.
- In much Marxian literature ‘spatio-temporal’ fixes are seen as economy-wide, pivotal changes —i.e. Wolfgang Streeck’s narrative in Buying Time: The Delayed Crisis of Democratic Capitalism viewing the crisis of the 1970’s as being ‘fixed’ first through inflation, then public debt, then private debt. When more-specific processes are identified as spatio-temporal fixes— such as ‘creative lawyering’ and the ‘private shaping of legal regulation’ as you detail (p. 172)—are we still talking about the same process? In particular, what are the implications for agency between what we might call ‘micro-’ and ‘macro-’ fixes?
In general terms, spatio-temporal fixes describes capitalist and state-led strategies aimed at redirecting capital flows from one place to another (geographical expansion), fixing capital in a particular space (investing in long-term infrastructure), and/or through temporal deferral. While these strategies occur at macro-levels (global and national), they also take place at more immediate scales of social life. These fixes regarding credit money involve specific – yet temporary – strategies employed by capitalists and local governments, which need to be studied and explained with more nuance. It is with this motivation that I attempt to focus on legal, regulatory and discursive strategies of debtfarism at various scales of state power.
In the Urban Experience, for instance, Harvey insists that ‘the very existence of money as a mediator of commodity exchange radically transfers and fixes the meanings of space and time in social life’ (1989: 165). Command over space and time are not only integral to the social power of money, including credit money, but also to resolving internal contradictions that act as barriers to credit-led accumulation. Take the example of the targeting of payday lenders of particular low-income and racialised neighbourhoods. Payday lenders also engage in temporal deferrals each time they permit borrowers to rollover their loan thereby extending the problem of payment to the future whilst extracting fees and interest rates. Spatial displacement also involves simultaneous scales. US payday lenders were temporarily allowed to evade state-imposed restrictions on interest rates by teaming up with national banks and thus finding shelter in federal banking laws.
With regard to agency in micro-macro fixes, I reveal in the case studies how the failure of surplus workers to meet their debt obligations affects, and in turn shapes, the macro-fixes through bankruptcy laws, regulatory, discursive conducted through debtfarism. This view of agency also holds for resistance. Debtors at ground zero, who are directly affected by both micro-fixes and macro-fixes, are often better placed to delegitimise (or, weaken as discussed in Question 8 below) by not only politicising debt-creditor relations as exploitative and unequal but also acting collectively against state and corporate interests. A good example of this was the birth of the Spanish grassroots organisation, Platform for People Affected by Mortgages (PAH) in 2009, which has successfully halted many evictions and continues to demand the state to acknowledge and respect housing rights. Although locally organised, PAH is also very much engaged in shaping the social effects of ‘macro-fixes’ such as national austerity politics imposed by another scale of neoliberal governance, the Troika.
- You argue that ‘neoclassical economics formed the intellectual basis for guiding state policy in the United States in the late 1970s because it was widely accepted by dominant classes at a particular point in history’ (p. 50). But does this, in the terms of Damien Cahill’s The End of Laissez-Faire? On the Durability of Embedded Neoliberalism, produce an ideas-centred constructivist account of the changes driving the state and economy?
No. In the same spirit of The End of Laissez-Faire?, I am very clear that there can be no separation between the material, discursive (including ideas) and institutional dimensions of neoliberalism, and, by extension, debtfarism. What I am attempting to do with this quote and wider discussion is to establish some of the intellectual ideas underpinning neoliberal policy and ideology (see Question 5 above). Indeed, a few pages after this quote, I state that ‘the continual attempt to reconstruct neoliberal state on these utopian premises of neoclassical economics leads to recurring paradoxes that must be resolved through rhetoric and regulations, or what Jamie Peck refers to as fail forward strategies, we must not lose sight of their connective tissue to the dynamics of credit-led accumulation, which includes the poverty industry and the power relations therein.’ Put differently, ideas are important, especially ones that become hegemonic; but they need to be understood in relation to their material and historical bases.
- In your discussion of the role of law within the field of the state, law is seen as playing a ‘dual role of disciplining labour, while recreating . . . the illusion of a neutral state through the masking of extra-legal powers’ (p. 172), with this statement supported by reference to Ian Bruff’s article, ‘The rise of authoritarian neoliberalism’. Observing the increasing tendency to isolate economic policy away from democratic influence via legal and constitutional means, Bruff—through reference to Nicos Poulantzas’ State, Power, Socialism—sees this process as paradoxically strengthening AND weakening the state. Does this ‘strengthening-weakening’ dynamic also hold in the instance of debtfare states?
Yes. Given its inherent connection to capital accumulation processes, and its inherent contradictions, debtfarism like other aspects of neoliberal governance undergo strengthening and weakening, particularly along lines of legitimacy and ability to implement specific policies and regulations with minimal resistance. Although the strengthening-weakening dynamic occurs on a constant basis, it is contingent on struggle and power configurations in capital accumulation. The weakening and strengthening tendencies are also mutually enforcing despite existing in tension. For instance, crises represent a turning point in which violent solutions to the existing barriers to accumulation can be imposed. The re-imposition of austerity measures after each major financial crisis since the early 1980s is a case in point. From this time onward, a central plank in austerity politics has been the application of the social power of money that favours capitalist and state interests over others.
In line with Ian Bruff’s insightful analysis, the reason why I include monetarism as a core ideology and policy of central banks as one of the key components of neoliberalism that support debtfarism is because of its obsession with interest rates generally eclipses due to its ideological role. This may be seen not only in its practices of shielding economic (fiscal and monetary) policy from democratic influence, but also in subsuming fiscal policy under monetary policy and the latter’s concrete abstractions (interest rates and money supply). The rule of social and political life by concrete abstractions creates a reality in which these processes appear to have more power over us than we have over them. All of this, of course, is compounded by imposed ignorance tied to the technical and apolitical language employed by the anointed experts and their objective knowledge.
- Is debtfarism merely the next logical step in the evolution of capitalism, or something more/different?
It is perhaps useful to underline here that debtfarism is not a standalone state. It is instead a central component of the neoliberal form of domination authored by some capitalist states. Reflecting the instabilities and dynamics of capital accumulation, these processes and practices are constantly changing through their modus operandi of failing forward. As an integral vector of neoliberalism, debtfarism shifts and changes as it attempts to reactively mediate the contradictions and struggles arising from the continual expansion and intensification of credit-led accumulation. Through its discursive and regulative strategies (e.g., bankruptcy law, usury law, consumer protection law), debtfarism has facilitated the expansion and naturalisation of one of the frontiers of contemporary capitalism: credit-led accumulation.
- Throughout the book, you make numerous references to the potential for the discipline of the market—through the social power of money and its buttressing by the debtfare state—to be brought to bear unevenly on marginalised groups, variously gendered and/or racialised. Can you point to any exemplary works on the matter, or any potential avenues for further analysis, you would like to see covered in the future?
There is indeed some new and exciting work aimed at exploring articulations of debtfarism such as Chang Kyung-Sup’s work on household debt in South Korea and Lena Lavinas’s research on the commodification of welfare and overindebted households in Brazil. In Political Ecology of Climate Change Adaptation, Marcus Taylor rigorously discusses the role of debt in agrarian based societies in South Asia by revealing the significance of caste and gender. Adrienne Roberts’ research on finance and gender has also been exemplary in theorising the marketisation of social reproduction in contemporary capitalism.
That said, an area of further analysis that I would like to see developed is more attempts at updating Marxian analysis around the power of money. I would very much like to see studies that strive to analytical explain and historically capture the cultural (discursive, subjective, symbolic, and so forth) dimensions of money without losing sight of its material basis in the dynamics of capital accumulation. Relatedly, I think an important silence to fill in the present debates on the social dimensions of finance is historically informed theorisation of, and concrete investigations into, the power of public and private money and their impact on marginalised labour power along racialised, gendered and class lines. My current research project is aimed at exploring these issues at the ‘ground zero’ of global austerity politics by focusing on low-income rental housing in impoverished spaces in Berlin, Dublin and Toronto.