Can We Overthrow the Creditocracy?

In the long history of oppression, where are we today? And what can we do about it?

The simplest, most direct form of oppression is forced labor: Work for me, do what I say, or I’ll beat you. And if no beating short of death will induce you to do what I want, then the example of your demise will at least make my next victim more pliable.

Unfortunately for the oppressor, though, forced labor is also morally simple. The press-ganged victim knows I have wronged him or her. Given the chance to run away, or (better yet) kill me, he or she will feel completely justified.

That’s why history is full of attempts to dress oppression up and make its morality more confusing. If you want to be cynical, you might tell the whole economic history of the world that way: as a series of systems to dress up oppression and shift the guilt of it from the order-giver to the order-taker. In every era, the many work and the few benefit, but those who run away or revolt are the immoral ones. They are ungrateful wretches who bite the hands that feed them and repay their kindly benefactors with violence.

For example, from today’s perspective the slave society of the old South seems pretty stark: Do what I say because I own you and your children and your children’s children down to the last generation. And yet, the literature of the time — written by whites, naturally — often waxes lyrical about the great good the white man has done for his undeserving servants: given them the gift of civilization, saved their souls for Christ, accepted them in his home and fed and clothed them since birth, or perhaps purchased them from an animal-like existence under a slave-trader and bestowed upon them new names and new roles (however lowly) in human society.

How dare the slave forget his obligation and steal himself away!

Freedom without access. Most systems are more subtle than that. The people at the bottom aren’t owned, and in fact their freedom may be a central point of public celebration. But a small group controls access to something everyone needs to survive. To guarantee your own access, you must strike a deal with them — on their terms, usually — and do what they say. And because society frames its story in a way that justifies the access-control, the people who tell you what to do are not your oppressors, they’re your benefactors. You owe them for giving you the opportunity to serve.

Whatever that necessary something is, and however access to it is controlled, tells you what kind of oppressive system you’re in. In feudalism, a small group of lordly families control the land you need to grow food. To get access, your family must swear fealty to one of them, and God have mercy on the traitor who breaks his vows. In the sharecropper system that replaced slavery in the South, whites (often the same whites who had owned the antebellum plantations) controlled access to money and markets. Freedom and even a small chunk of land might be yours, but the wherewithal to survive until harvest had to be borrowed, and then you were obliged to sell your crop to your creditor, for a price he named — usually not quite enough to clear your debt. If you tried to escape this system, you weren’t a runaway slave (as your mother or father would have been), but you were a runaway debtor and the law would hunt you down just the same.

In the North, oppression took its purest form in the company towns immortalized in the song “16 Tons“, where the singer imagines that not even death will get him out. The company controlled every side of the transaction — not just access to productive work, but the scrip you were paid in, and the company store where you could spend it. The system wasn’t quite so obvious in the bigger cities, where many employers drew from the same labor pool, but basic outline was the same: To get access to what Marx called “the means of production” — land, factories, mines, or any other resource that human labor could turn into the stuff of survival — the masses at the bottom of the pyramid had to deal with a fairly small group of employers, who could dictate wages and working conditions.

As on the plantations or the feudal manors, the language of morality had been turned inside-out: The oppressor was the benefactor. Give me a job, the worker begged.

The American exception. Underneath all that oppressiveness, though, something new had been blooming in America from the beginning. Dispossessing the Native Americans of an entire continent had created opportunities for wealth so vast that the old upper classes couldn’t exploit them all without help, so common people were cut in on the booty.

Already in 1776’s The Wealth of Nations, Adam Smith had documented that wages were considerably higher in the colonies (where there was so much work to be done and a comparative dearth of hands) than in England itself. The post-revolutionary Homestead Acts codified a system that had been operating informally for some while: For whites, American wages were enough above subsistence that you could build a stake of capital, buy tools and transport, and then set out for the hinterland and establish an independent relationship with the means of production. For one of the few times since the hunter-gatherer era, working-class Europeans could apply their labor directly to the land and live without paying for access.

Post-Civil-War American history can be told as a struggle by the capitalist class to claw back those hastily bestowed opportunities by manipulating markets, monopolizing the new railroads, and generally “crucify[ing] mankind upon a cross of gold” as William Jennings Bryan famously put it. But they never completely succeeded. Hellish as turn-of-the-century mines and factories could be, the vision remained: Capitalism didn’t have to be so bad, if workers had a way to opt out and employers had to compete to hire them.

The early 20th century brought a series of shocks to the capitalist system: the world wars, the Russian Revolution, the Great Depression, and finally the very real threat of Communist revolutions. The devastated Europe of 1945 in some ways duplicated the opportunities of the New World: There was so much work to be done that for three decades (les Trente Glorieuses, as the French put it) full employment and rising wages could be the norm.

In the Cold War competition with Communism, Capitalism had to loosen up to maintain the workers’ loyalty. And so a mixed public/private social contract developed: The means of production would continue to be privately owned, but government would keep the worker in the game. Government would provide education at little or no cost to the student; guarantee a liveable minimum wage; protect consumers from unsafe products and workers from dangerous workplaces; prevent monopolies from forming; create jobs by building public infrastructure; defend the workers’ right to form unions powerful enough to negotiate with corporations on equal terms; maintain a safety net against unemployment, disability, and old age; and (except in the United States) take care of the sick. The political expectation was that a rising tide would lift all boats: If profits rose, wages would rise, and everyone would benefit.

Counterrevolution. But by the late 1970s, the failure of the Soviet system to make good on its economic promises made Khrushchev’s we-will-bury-you threat ring hollow, and Western capitalists started to wonder if they’d given away too much. The theme of their Reagan/Thatcher counterrevolution would be privatization. Wherever possible, get government out of the picture so that the natural power imbalance between worker and employer can re-assert itself.

And that has been the story of the last not-so-glorious forty years: Powerful unions and nearly-free state universities are mere memories. Inflation has pushed the minimum wage down towards subsistence. We are told that the wealthiest nation in the world cannot afford a safety net; if bankruptcy looms (or can be manufactured), the solution is not to commit new resources, but to slash benefits. Consumer and worker protection is “job-killing regulation”, and making up for a job shortfall with public works is unthinkable. Increasingly, even public K-12 education is under fire; if you really want a high-quality education for your child, perhaps a government voucher will defray the cost a little, until inflation eats up that subsidy as it has the minimum wage.

As a result, even as productivity-per-hour and GDP-per-capita have continued to rise, wages have not. Ever-increasing shares of the national income and the national wealth are controlled by the top 10%, the top 1%, the top .01%. Even in the uppermost levels of the economic pyramid, there is always an even smaller class of people just above you whose skyrocketing wealth is leaving you far behind.

Creditocracy. Andrew Ross’ book Creditocracy and the Case for Debt Refusal points out that the goal of the counter-revolution is not just a restoration of late 19th-century capitalism, in which large employers dominate by controlling access to jobs. It’s a subtly different system of oppression entirely: a creditocracy.*

Everything the Cold War social contract promised is still available, you just have to pay up for it. How will you do that? You’ll get loans, and spend the rest of your life working to make payments. Rather than beg “Give me a job”, you’ll beg “Give me loan, so that I can get what I need to get and keep a job.” The bankers will be your benefactors, and then they will tell you what to do.

Education is where this project is most advanced. Probably there will always be some way to warehouse children at public expense while their parents work, either in public schools or in minimal private schools fully covered by a public voucher. But if you want the kind of education that gives a child options beyond minimum wage or welfare, you’ll have to pay up. Some people will be able to cover that expense, but most will have to borrow. If we’re talking about college, we’re already there. Working your way through college was once a realistic goal; it no longer is. The Federal Reserve recently estimated total student debt at $1.13 trillion, with about 1 in 8 borrowers owing more than $50,000 each, and a small but increasing number beginning their careers more than $200,000 in the hole.

If you just want to live somewhere, that won’t be a problem. But if you want to live in an neighborhood where potholes are fixed and police protect you rather than prey on you, you’ll have to pay up. Need a loan?

Public transportation? Forget about it. You can stay home for free, but if you want to work you’ll need a car, and cars cost. Calories are easy to come by, but safe and healthy food? Still available in certain upscale groceries, if you can afford it. Medical care? We’d never just let you die, and we have repayment plans with attractive rates. Clothes? I see you’ve got your body covered, but you’ll never get a job looking like that. Libraries? Parks? There are some you can join for a membership fee, though probably not in your neck of the woods. News? Comes from cable TV or the internet, via the local monopoly. Retirement? You can never be sure you’ll have enough to stay out of poverty, but maybe your kids will co-sign for you if you live too long.

During the post-war Trente Glorieuses, debt was a way to anticipate your rising income and get a few luxuries earlier than you otherwise might. But in the Creditocracy, debt is a necessity; all but the wealthy need to borrow to stay in the game. And once you owe, the onus is on you to toe the line: You’ll never cover your payments working in a field you love, or letting moral considerations control what you will and won’t do for a living. (Are you sure you don’t want to fight in our war? We’re hiring.) You don’t dare stick your neck out politically or socially, if you want to stay employed and keep making your payments. Maybe someday, if you get it all paid off, you’ll live by your heart and your conscience. But until then …

And where does this needed credit ultimately come from? It’s conjured out of the aether by the Federal Reserve, and distributed to the big banks by loans at rock-bottom rates. That’s the controlled access that makes the whole system possible. They have access and you need it, so they can tell you what to do and leave you thanking them for it. And if they ever push things too far and make loans that can never be repaid, then they’ll have the government behind them, bailing them out and sticking ordinary taxpayers with the bill. You may have lost your home, your savings, and God knows what else in the whole mess, but at least the banker will be made whole.

The Morality of Default. On the rare occasions when systems of oppression are beaten, they are first beaten morally. Slavery can’t be defeated until the runaway slave becomes a hero rather than a scoundrel, and the rebellious one can become a soldier rather than a murderer. The company town can’t be overthrown until the worker who refuses to work becomes a striker rather than a bum, and values solidarity with his comrades over the debt he owes his employer for “giving” him a job.

Today, it seems like an impossible dream that debtors could ever take the moral high ground away from creditors. Somebody who borrows and then won’t pay is a deadbeat, a moocher, a loser. It seems hard to imagine a debtors’ rights movement that could win popular support for a repayment strike or the outright renunciation of unreasonable debts.

But that’s what Ross envisions. To get there, we need to develop and popularize moral standards that separate good debts from bad debts. For example, view John Oliver’s piece on the payday lending industry, and then consider the idea that many of these loans — particularly ones where the original principal amount was paid back long ago, but the compounding interest has taken on a life of its own —  should just not be repaid. Similarly, the Consumer Financial Protection Board is suing ITT Educational Services for tactics that seem widespread in the for-profit college industry: using high-pressure sales tactics to push students into taking out loans, when they have little prospect of either getting a degree or paying off the loan. Some of the sub-prime loans of the housing boom were likewise made with no reasonable prospect of repayment, then sold off to investors anyway. The primary fraud came from the banker, not the borrower.

Other debt is perhaps no fault of the lender, but should not be charged against the debtor either. Medical debt — often as clear a case of pay-or-die as any highway robbery — is the best example, but much student debt fits as well. The debt exists because of society’s failure to provide what ought to be public goods. If any debt is going to vanish in the fancy bookkeeping of the Fed, this kind of debt should.

Some debts are legitimate, but there are equally legitimate claims in the other direction, ones that the Creditocracy does not take as seriously. Much of the developing world’s debt to the wealthy countries might be cancelled by fair reparations for colonialism, or by the responsibility that industrialized nations have for using up the carbon-carrying capacity of the atmosphere. Today, the obligations in one direction are considered iron-clad, while the ones in the other are optional. Why should that be?

Probably most debts should eventually be paid. But even they might also be part of a larger debt strike, to force action on the ones that should be renegotiated or just renounced.

In the long run, the infrastructure of the Creditocracy might be torn down and rebuilt into an economic system whose primary purpose is to create useful goods and services rather than profits, a world with more co-ops and credit unions and crowd funding, and less money swirling around in financial derivatives.

But long before that can happen, the moral structure that supports the Creditocracy needs to be challenged and shaken at many levels. Imagine, if you can, a world in which the debtor who does not pay — like the slave who runs away or the worker who sits down on the job — is a hero.

Not a deadbeat, a moocher, or a loser. A hero.

* One reason this “review” is so long is that although I think the ideas in the book are important, I don’t actually like the way Ross makes his case. His style is repetitive, needlessly polemic, and sloppy with numbers. So I’m recasting the ideas in my own way.

One example: While making some point about Google and Facebook, Ross mentioned what each “earned” in a particular quarter. The numbers seemed high to me, so I checked them. He had actually quoted the companies’ revenues, not their earnings.

He was making a qualitative point, in which revenues worked just as well as earnings (i.e., some other number was small potatoes to companies that big). So it seemed to just be sloppiness rather than deception. But I don’t have to hit many such examples before I start to doubt everything.

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  • jeherendeen  On January 19, 2015 at 12:10 pm

    “That’s the controlled access that makes the whole system possible. They have access and you need it, so they can tell you what to do and leave you thanking them for it. And if they ever push things too far and make loans that can never be repaid, then they’ll have the government behind them, bailing them out and sticking ordinary taxpayers with the bill. You may have lost your home, your savings, and God knows what else in the whole mess, but at least the banker will be made whole.” — Actually, that’s just a small part of the problem. With fractional reserve banking, 90% of what the banks loaned in the first place was never anything but thin air. The Colonists might have had higher salaries than their European counterparts, but they also had colonial scrip, which freed them from debt-based banking, which the Stamp Act sought to impose on them–the real cause of the Revolutionary War.
    The solution, therefore, is either to end fractional reserve banking, or to raise everyone’s benefits sufficiently so that they are not forced to take on debt in order to have adequate food, shelter, and clothing for survival (regardless of whether ‘Job Creators’ feeling like creating adequate jobs). Does Ross’ book actually say as much, or is his book just another exercise in understating the problem and distracting the public from those books which actually go to the source of the problem, e.g., WEB OF DEBT; VILE ACTS OF EVIL; AIDS, OPIUM, DIAMONDS, AND EMPIRE; THE ECONOMICS OF REVOLUTION….

  • coastcontact  On January 19, 2015 at 1:37 pm

    Sadly this posting is too long and draws conclusions that can easily be contradicted.

    While I understand your point that people are being used and manipulated you try to deny the world as it exists. The rich have the money and power that the rest of us don’t. It may be difficult but you can be born into poverty and become wealthy. Is there and viable alternative to capitalism? Today even Communist China has adopted free enterprise.

    Connecting today’s excessive personal debt with yesterday’s slavery is a stretch. Few Whites were ever enslaved in the last two centuries. No one is forced to buy a BMW or a 60″ TV.

    Writing about the exorbitant pay given to corporate managers would be a worthwhile effort.

    • jeherendeen  On January 19, 2015 at 3:13 pm

      …but everyone pretty much IS forced to buy food, whether or not they have any income. Which shows how unbridled capitalism is more profitable than slavery, as slaveowners had to invest enough in their slaves’ well-being to recoup their expenses. All capitalists need is a steady supply of desperate workers.

      The rich have money & power, but lack NUMBERS.

  • orionblair  On January 19, 2015 at 6:27 pm

    I write from the Philippines, where the Pope spoke a powerful message about economic justice. How deeply that message will be heard and acted on here, and elsewhere, remains to be seen. I would welcome your thoughts on the parallels between his message and that of Martin Luther King.

  • Abby hafer  On January 19, 2015 at 9:24 pm

    I am wondering about the restoration of reasonable credit limits. That is, the amount that can be owed on a normal credit card–not specific debt, like educational debt, for instance, but plain-old debt from buying general stuff. I personally know at least one person who is 50K in debt, and it seems to mostly be case of just buying too much unneeded stuff. The woman who, with her husband has 50K in debt also owns. for instance, diamond stud earrings, a diamond necklace and a diamond bracelet.

    • coastcontact  On January 20, 2015 at 12:42 pm

      This is precisely the kind of people who buy the BMW simply because they want it. In world where freedom of choice is permitted, sellers of all things can be very successful. The credit card world thrives and so does our credit driven American way of life. On the plus side we are all driven to work harder to pay for all that stuff. That is the reason so many people want to live in the USA. This is a land where success is admired.

  • lsnrchrd1  On January 20, 2015 at 10:01 pm

    An existing organization diligently attempting to modify our (likely unsustainable) present economic paradigm:

  • jsn  On January 23, 2015 at 12:51 pm

    With regards to which should be paid back, every failed loan is the result of prior failed underwriting. In the old days of real loan officers, these things got worked out, but that was part of the Cold War arrangement where sharing the benefits of the economy suited the political needs of the wealthy. Irresponsibility should not be rewarded in borrowers or lenders.

    At present lenders are rewarded in proportion to their irresponsibility: none of our major banks would exist today but for the bailouts from the Fed, and yet the bailees are paid better now than ever before. The people of Greece and Ireland did not profit from the excesses of their financial elites but are continuing to pay the price for those elites failures.

  • chromefist  On January 25, 2015 at 8:37 am

    Reblogged this on The Regrets File.

  •  On April 28, 2015 at 9:45 am

    may loan lana chata hu bt govt. servant bt pay both kam hy kia karu. To learn more on loan tips, you can visit :-


  • By Unreasonable Debts | The Weekly Sift on January 19, 2015 at 11:51 am

    […] This week’s featured post is “Can We Overthrow the Creditocracy?“ […]

  • By The Yearly Sift: 2015 | The Weekly Sift on December 28, 2015 at 10:11 am

    […] full-fledged reviews this year were Islam Without Extremes by Mustafa Akyol, Creditocracy by Andrew Ross, The Half has Never Been Told by Edward Baptist, and How Propaganda Works by Jason […]

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