Debt: What It Is and Why We Fight It
A panel discussion held at the Occupy! Gazette‘s Occupy Onward Conference, December 18, 2011, at the New School for Social Research, New York City. Transcript from Occupy! Gazette Issue 4.
David Graeber, Debt, The First 5,000 Years
Mike Konczal, The Roosevelt Institute
Brian Kalkbrenner, Occupy Student Debt
Sarah Jaffe, AlterNet
Moderator: Astra Taylor, Occupy! Gazette
Transcribed by Elisabeth Asher
Astra Taylor: Hello, everyone. Welcome to our hastily arranged conference. It’s really nice to see you all here.
So, debt. It’s nice to talk about this subject here at the New School, the institution responsible for my debt, the institution I have begrudged for the last decade, every month when I pay $400 in interest.
One of my favorite moments of Occupy Wall Street was the second or third night. I walked up to Zuccotti Park—it was early on, I was shocked that there were so many people there—I’m walking along the corner of Broadway and Liberty, and there’s this guy, he’s playing a carnival barker, and he says, “Step right up! Write down what you owe to the bank; write down what you’re worth to the 1%!” He had these huge sheets of paper, and he had probably two dozen markers, and people were writing down what they owed and what type of debt. I actually walked by and went into the park and had this weird hesitation about putting that number down—because I would have to think about it. I would have to think about how much money I owed. But, as we were leaving, I went and took the marker and I wrote it down: $42,000. I felt sick to my stomach. Behind me, a girl who couldn’t have been more than 22 or 23 writes down $120,000 of student debt. And I thought, this is a radical moment, because we are articulating this number out loud, we are putting it in a political context, and this is the moment I’ve been waiting for. Something’s happening.
I’ll introduce the panelists as they talk. The first is Sarah Jaffe. She’s a reporter for Alternet, where she’s been writing about debt. I want to ask this very simple question: Why isn’t debt a personal issue? I signed those loans. I might’ve been 17 when I signed for the first one, but nevertheless, I signed my name. I took out the debt. It’s my fault. Why is it a political issue?
Sarah Jaffe: Oh, so many reasons. A lot of us are only paying interest on this debt. I’ve got 15 grand in student loans, and I’ve had the same 15 grand in student loans for going on 11 years now, because I’ve just been paying the interest. This is a problem. This is a political problem. The student loan debt alone is going to be a trillion dollars sometime in the next couple of months. That’s a trillion dollars that we’re all paying in interest to Sallie Mae, to Citibank—mine was with Citibank for several years—to Wells Fargo, to Discover Card Services, which bought a bunch of student loan debt recently, and to the federal government. But we’re not paying that into our local businesses. We’re not paying this into the corner store. We’re not paying this to the farmer’s market. We’re not paying this to anything. We’re not buying a home because we have student loans or we’re not going back to school because we have a home loan.
Debt has been a substitute for wage increases in this country for about the last thirty years, give or take. Real wages haven’t gone up in a really long time. We’re mortgaging our future on credit cards and home equity. And when the housing bubble popped, and the credit markets froze, we suddenly realized exactly how little we had that wasn’t promised to somebody else already. It becomes a drain on the future. My favorite example, about healthcare reform—there’s a shortage of primary care doctors, because primary care doctors make less than specialists. And most people who go to medical school owe a ridiculous amount in student debt. So we actually have a shortage of healthcare providers because of the student loans that they’re carrying.
We should not be ashamed. When people come out and talk about it, it’s a really powerful thing. We need to stop treating it as a personal failing. It is not a personal failing; it is a political issue.
Taylor: Brian Kalkbrenner is our representative from Occupy Student Debt. He’s also indebted—he has first-hand experience. I’d like to know, why now? A lot of us have been in student debt for years, and wondered why nobody was talking about it. Why is this issue suddenly on the public radar?
Brian Kalkbrenner: That’s a good question. I’m part of the Occupy Student Debt campaign, which came out of the Empowerment and Education working group, which Nicholas Mirzoeff spoke about earlier. I am a student debtor. It’s funny, because four months ago I was talking with a friend of mine who got me involved in this campaign, and we were talking about this very thing. There’s a ready-made population to be radicalized in student debtors. Everybody I know suffers from it. When I talk to people—even if they have nothing to do with OWS, they’re not radical people, they’re not activists—I talk to them about this campaign and instantly they say, “Oh man, student loans are so fucked.” Everybody knows this is a problem.
So why now? I don’t know; I can’t really answer it. But I want to talk a little bit about some of the stats around student debt. Graduating seniors in 2010 carried an average debt of $25,000, while unemployment for that same group was at 9.1 percent. College tuition has increased more than 400 percent since the 1980s, with no appreciable increase in wages or inflation; it outstrips inflation. The debt default rate at for-profit institutions is 29 percent, and more than half of the student population at these for-profit colleges is African American or Latino. It’s a problem that affects the whole spectrum. Student loan debts are exceptional in that they’re afforded no protections. Student debtors are not protected from bankruptcy; student loan debt can follow you to the grave. As of 2005, benefits like Social Security can be garnished, which is unprecedented. It’s very easy for loans to double or triple in a period of ten years—you fall behind on a payment, suddenly there’s this whole chain of fees that is triggered, and you’re sort of like underwater trying to get back, just recovering those fees, and then you start paying the interest, let alone getting to the principal.
All that is to say that student loans are predatory loans. And, you know, it’s not a privilege. There’s a view like, “Well, you know what you’re getting into, taking out student loans, this is a privilege problem.” It’s not a privilege problem, for several reasons. One is that a college degree has become a prerequisite in a knowledge economy. You have to take on student loan debt to get this degree, but then you graduate with this debt increasingly into an economy where you can’t get a job. So you’re already in a position of indenture-tude. The Occupy Student Debt campaign launched a few weeks ago, and it centers around a student debt pledge of refusal.
The pledge begins, “As members of the most indebted generations in history, we pledge to stop making student loan payments after one million of us have signed this pledge.” There’s also a pledge for faculty supporters; there’s a pledge for non-debtors, a non-debtor pledge of support. Pledges in the campaign are based around four principles: 1) That the federal government should cover the cost of tuition at public colleges and universities, which incidentally would be a price tag of about $70 billion, which is a paltry sum actually—it sounds like a lot but it’s not. 2) We believe that student loans should be interest-free. 3) We believe that private and for-profit colleges and universities, which are largely financed through student debt, should open their books. So these for-profit universities and private schools like the New School and NYU, they’re financed through student debt, and yet their operations are a private matter. They’re not a matter of public record. And finally, 4) the current student debt load should be written off.
Another thing we’re trying to do is change the language around student debt. We’re not asking for forgiveness. We don’t believe it’s something we should be forgiven for. There’re a lot of people defaulting on their student loans; there’re a lot of people buried by this debt. It’s an agonizing thing, when you’re making this decision whether to pay, like, this electricity bill, or my student debt bill. And I don’t know if you’ve been up against it, but I certainly have, and I’ve certainly chosen not to pay my student debt bill before, because, well, this other bill is more important. It’s sort of a harrowing experience for a lot of reasons, including feeling morally culpable, but also just helpless. And one of the things about this campaign is it provides a way for isolated debtors to join together in a collective body. And in doing that, in keeping with the spirit of OWS, we’re also not asking for any sort of reforms; we’re not asking for the powers that be to take a certain set of actions. Rather we’re trying to change the landscape of the power structure itself and create a new empowered body, political body. If you’re interested, our url is occupystudentdebtcampaign.org. The three pledges are there, there’s a lot of other information about it, and I’m sure more will come out as we talk.
Taylor: I wanted to talk a little more about just how punitive student debt is. Because when you say you default on your student loans, it almost sounds like maybe you default and get out of it. I know from experience that—I was very poor for a while, and I just stopped paying my student loans. And some months went by and I got a phone call, and they said, “You have not been paying your student loans, so we’ve added 19 percent to your principal.” Suddenly overnight, like $12,000 more. So in other words, I couldn’t pay, and they said, “You owe us more!” I don’t know if that was defaulting or what, but it definitely scared the shit out of me, which is why I never advise people to not pay their student loans. But what—you know, they can garnish your Social Security—what does it mean to default? What can they do to you?
Kalkbrenner: They can do all kinds of things to you, I guess. The most important thing is that there are all sorts of traps built into the system so that if you miss a payment or fall behind—this number just grows exponentially. And you find that a lot of the programs to, for example, reduce payment, you know, deferment and hardship programs—they’ll reduce your payment, but what they don’t really tell you or don’t emphasize is that in doing so, they do a kind of calculus which then increases your principal. Right? [Some laughter.] Yeah, see, some people know.
In garnishing wages, they can garnish up to 15 percent and that won’t count toward any of your interest principal. So the consequences are real, and this is part of the campaign, trying to mobilize this body. Again, we’re suffering the consequences in isolation, but, in coming together, it’s not that we’ll suffer these consequences together, it’s that we will be a voice for change. And because such a sizable portion of the population has this kind of debt, there’s a real radical potential, I think.
Taylor: Next up is David Graeber, author of Debt: The First 5,000 Years. He’s going to take us in his time machine to the beginning! And it’s perfect to pick up on this word, “forgiveness.” We’re not asking for forgiveness, because one thing David discovers in his book is that morality and debt are always deeply entwined, and that it is a kind of vacillating concept. Maybe you could talk about the issue of primordial debt—are we all indebted, just because we exist and we speak, we owe everything to everybody? Or is debt something that controls us and is connected to violence?
Graeber: OK, you want me to take that—
Graeber: Oh, wow, OK—
Taylor: Seven minutes!
Graeber: Ahhh! All right, where do I start? I was thinking—this paralysis that you face when you’re in debt, the feeling that this is something I did terribly wrong—it’s a deeply personal thing. But maybe the best way to contextualize this feeling is to consider the fact that over the course of human history, it’s probably true that most people who have ever lived have been debtors. Think about that for a moment. Could they all have done something terribly wrong? It’s almost certainly the case, because the densest populations are usually in big empires, and in such situations, somehow or other it always seems to happen that a very small percentage of the population ends up creditors to everybody else. And, in fact, if you look at world history—and when I started researching debt, it was quite remarkable—you see the same thing, over and over again, across Eurasia, certainly, and China, and India, the Middle East: everybody’s a debtor. And that debt is identified with morality in the sense of moral obligation. What you owe to other people, as it were, is seen in terms of debt. So often you find the language of debt, guilt, and sin—it’s the same word. It’s true in a lot of different European languages. It’s true in Sanskrit; it’s true in Aramaic. The famous “Forgive us our trespasses, just as we forgive those who trespass against us”–it’s actually debt, in the original. “Forgive us our debts,” just as we forgive those who owe us money. Except, of course, we don’t. That whole point is like, “See, you’re a bad person. God forgive you.” So that’s the kind of paradox of debt: on the one hand, that it’s morality; on the other hand, people who lend us money are universally recognized as being evil. It’s almost impossible to find any positive image of a moneylender anywhere in human history. I guess until the Grameen Bank came along—it was a heroic feat.
So there’s this obvious profound moral ambivalence going on. It’s especially so if you look at world religions where almost invariably they kind of start by saying debt and morality are the same thing, except they say, “Of course, not really.” In the beginning of Plato’s Republic, they start by saying, “Well, what is justice?” And someone throws out: “Justice is just paying your debts.” And Socrates says, “That’s ridiculous, of course it’s not.” And then they spend the rest of the book trying to figure out, if not that, then what. They never quite figure it out.
It’s the same with most religious traditions. In the Hindu tradition, they start with, your life is a debt you owe to the gods. And then they say, except, well, no—ultimately it’s recognizing that you and the cosmos are the same, then you’d realize there is no debt. Biblical tradition is the forgiveness of debts, cancellation of debts. So it seems like these people feel like they have to start with this language of debt as morality, but then get rid of it again. Why? It’s because this very idea of shame, of sin, that is associated with debt makes it this incredibly powerful ideological mechanism, so that any time you have violent inequalities of power—and mass inequalities of wealth and power have to always be maintained by violence of some kind or another—the first move is to try to convince the people on the bottom that it’s somehow their fault, and debt is the easiest way to do that. The easiest, most obvious example is, if you conquer people, you say, “OK, you owe me your life because I didn’t kill you. So obviously, I expect you to pay up. I’m going to be a nice guy and let you off the hook for the first few months but after that, c’mon.” So suddenly you’re the nice guy and they’re running around, scrambling, feeling bad about themselves. It works amazingly well, except it also has this remarkable tendency to blow up in people’s faces.
Because it’s also true that the overwhelming majority of rebellions and insurrections, jacqueries, throughout world history, have been about debt—much more often than they are about more structural forms of inequality like slavery or serfdom or caste systems. People rebel about debt all the time. And part of the reason is because on the one hand it’s accusatory, and on the other hand, you’re saying, “Well, you should be my equal, you know, it’s an equal contract, except you fucked up.” And somehow saying that to someone is much more offensive than saying, “You’re just inferior.” Because the only response you can really make to that, if it’s destroying your life, at a certain point, is: “Wait a minute, who owes what to who, here?” This makes it a very explosive thing, so you get debt revolts, but it also means that the people rebelling end up using the master’s language, right? It’s the same if you look at Jubilee 2000 and efforts to forgive Third World debt, they said, “Well, you owe us.” Which is true, but, again, you’re framing things in terms of debt, morality is debt. So that’s why you have all these moral thinkers having to start by saying morality is debt, because that’s the language of politics that everybody on all sides is using at the time, and then trying to get rid of it again. And we’ve been in this moral dilemma in one form or another ever since.
I think it’s useful to bear in mind that these long-term historical problematics—they haven’t gone away.
Another thing I’ve discovered in research of the book is the idea of the generalized debt crisis—that we are experiencing today, I would say—is not new either. In fact, you might say that through most of world history, when moral thinkers and social thinkers thought about the sort of ultimate nightmare scenario, society completely breaking down, what they imagined was pretty much what we are experiencing right now. This is true of Confucian thinkers, or thinkers in the Middle Ages, or Aristotle. The tiny percentage of the population enslaves everybody else; they’re trapped in these terrible death traps that they can’t get out of; they’re forced to sell members of their family into slavery or themselves into slavery. I always say if Aristotle were magically transported to contemporary America, he would probably find the distinction between an indebted householder selling himself into slavery and renting himself to work for someone else as kind of a legal technicality. He would conclude that most Americans are, in fact, debt slaves. And would he be wrong?
There were methods that were put in place to get rid of this, to head this off, because it was assumed it would lead to generalized social breakdown. One of them was the jubilee—clean slates in Mesopotamia. For thousands of years it was considered standard practice if a new king came in, he would say, “All right, everything canceled.”They’d leave commercial loans, sometimes, alone, but all the consumer loans would just be wiped out, and they’d say, OK, start again. In Biblical texts, as some of us no doubt know, there was a tradition of cancellation every seven to forty-nine years. In the Middle Ages, they said, “Okay, we’ll get rid of interest-taking, we’ll get rid of debt peonage.” All of this was under pressure from popular movements. So there’s always some overarching institution to protect debtors so that you don’t have everybody becoming enslaved and the system breaking down.
This time around, ever since 1971, since Nixon went off the gold standard, what happened instead was they created the IMF and institutions like that not to protect debtors but to protect creditors, and to come up with this insane idea that no one should ever default, which flies in the face of even normal economic logic. The only way they can do it is by appealing to this very old idea of morality, that paying one’s debts and morality are the same thing.
Of course what we discovered in 2008 is that morality only applies to certain players in the game. Which has always also been the case. Another thing I’ve found quite regularly wherever you look is that there’s a huge difference between debts between equals and debts between, you know, rich people and poor people. Debts between rich people and each other—well, rich people can be incredibly generous and forgiving and understanding when dealing with other rich people, just as poor people can with each other as well. But when it’s between social classes, suddenly it’s like a religious responsibility, it’s sacred, you can’t possibly imagine how could they be defaulting! What we discovered in 2008 was that money, at this point, really is something they just make up with their magic wands. It’s a series of promises, of IOUs that we make with one another. It’s a social compact of a kind. When it’s really inconvenient, trillions of dollars can be made to disappear. The fascinating thing is that they absolutely refused to do it on a level of debts between big players and the little ones.
And this is why I think the sort of democratic core of this movement is debt and debtors. The Middle Eastern revolts actually had a lot more to do with debt than people let on. I always like to point out that Saudi Arabia actually did do a jubilee. That was their reaction to the Arab Spring. Well, they also doubled security forces. But they took a two-handed approach. They also canceled all debts. Of course they have a king; that makes it easier. They didn’t want to let it get out that they’d done this because it would set a bad example, they figured. But it can still be done. The old solutions are still available.
I wanted to throw that out, that we’re living in not historically unprecedented times. I think we need to think a lot larger than we have been. I think that has been gotten on the table—the idea that once we understand that debts can be waived away, they have been, they are being. If democracy is to mean anything, it means that who makes promises to who, what promises are kept, and what promises are being negotiated under what circumstances has to be democratically decided. It’s not a process that only 1 percent of the population can weigh in on. Especially now that we’ve realized that they’re not actually these amazing geniuses who are the only people who know how to run an economy, but are actually completely incompetent at anything but plundering and stealing.
Taylor: There’s a line in your book that says that it’s actually refusing to calculate that makes us human.
Graeber: Yes. We’ve come to see all morality as debt because we’ve come to see all of our relations in terms of exchange. This is something that has been thrust on us, and I think social science is just as guilty as economics in general. And one way that we can start to unimagine this world where we’re all debtors is to realize that many of our everyday interactions use completely different logic than economists talk about. I always like to say that communism is not some ideal, that it might exist at some point in the future; it’s the way most of us act with people we really care about all the time. A third of what we do is communistically organized, a third of it, often inside the family, is hierarchically organized—and we have to do something about that—and a third of it is exchange. The part of the economy where debt is even a meaningful term is a fairly slim portion. A lot of things that we’re talking about here might sound crazy and utopian, but they’re not. Communistic relations are the basis for all sociality. By reimagining them in terms of debt, we just throw ourselves into these series of logical traps, like religious thinkers who thought about your debt to the cosmos, or were forced to before saying, well, that doesn’t really work.
Taylor: Crazy and utopian Mike Konczal, from the Roosevelt Institute. We’re going to get back in the time machine and come back to the present day. We have a left right now that’s organized around higher wages and job security—and here we are talking about debt. What are the opportunities, what are the risks of that—and any chance for a jubilee in 2012?
Konczal: One of the things I like to emphasize is that when it comes to—you know, there’s obviously a lot of meta discussions about demands and what does the Occupation want—when it comes to debt, specifically when it comes to housing and student debt, we know a lot of things we can do, at the federal level, at the state level, at the local municipality level. Back in the 2008 primary, candidate Clinton proposed a foreclosure moratorium; candidate Obama proposed a modification bankruptcy, which he did not follow through on when he was elected. But we know things we can do. There are liberal wonks who can bore you to death with white papers. The problem is that, as we discussed a little earlier, debt is not seen as a political issue. It’s not seen as something that has gone out of whack. It’s not seen as something that necessitates a political response.
But the debt market is really a function of the government. If you look at the Constitution, our bankruptcy code is directly in there. The Founders were very aware of what that does. Besides slavery, more than half of all white people who came to the British colonies were indentured when they came here. They were very conscious of what that contract looks like. We talk about makeshift jubilees, right? Everything is kind of out of whack so they declare game over, they hit the reset button on debts. If you look at 19th-century US bankruptcy law, it looks exactly the same way. There were severe financial crises, severe depressions and recessions. And we just created the new bankruptcy code out of thin air and said, “You know what, all this stuff you couldn’t declare bankruptcy on before? You can do it now.” They did it in the 1890s. There were two or three years of readjustments, things went through the courts, and then the economy started picking up again. It was very common. We did a similar thing in the Great Depression.
So what are the two main mechanisms we have under our economy in America to deal with too much debt? There are two primary ways: one is the bankruptcy code, and the other is inflation. Inflation balances the interests; it’s a way of handling money that balances the interest between debtors and creditors. It puts the economy on a more forward path. It reduces the claims of the past and orientates us more toward the claims of the future. The Fed could be doing more to balance the interest towards debtors, to generate more growth or inflation. They are choosing not to. So, the bankruptcy code: the bankruptcy code does some good things, some bad things, but in the two places where we need it to do the most, it is toothless, it is broken. And those two places are housing debt, and student debt. For housing debt, you cannot reset a mortgage in bankruptcy. There’s a long debate why this is, but for a primary residence, you can’t do it. If you have a vacation home you can do it; if you have investment property, you can do it. If you’ve ever heard “cram down”–that’s one kind of inartful term–that is the change they were trying to make. They tried to make it in ’09. Larry Summers, Tim Geithner, and President Obama chose not to push it. A lot of progressive senators tried to make it a condition for TARP. Larry Summers said, “No, it doesn’t need to be; we’ll get it later.” They showed no interest in doing this. An absolute shameful act of the Obama Administration. If he loses the election next year, it’ll be mostly because of this, because I think it’s been a huge check on the economy.
Most of the really creative economic theory work going on right now explaining this depression is looking at debt levels, and they’re looking at places where foreclosures happen. And they say, you know what—now, to you, this may not be shocking, but if you’re an economist who deals with a lot of abstract models, this might be kind of shocking—places that are hugely indebted are not having a lot of growth. They’re not really healthy economic regions. Some people might win a Nobel Prize for this; I just want you to be ready for it. Because, from their point of view, every debtor has a creditor, and if the debtor’s struggling and drowning, the creditor’s going to be bouncing around, even happier. That’s actually not how it happens. So you’re seeing a lot more mainstream people. William Galston of Brookings, a senior economic wonk there, is calling for debt relief on housing. This is very shocking, right; this is not stuff you normally hear [from a centrist think tank]. So you’re looking there, and you’re seeing that housing debt is really detrimental: Foreclosures have huge costs to municipalities; they have huge costs to communities; they have huge costs to the people who go through them.
I want to emphasize one quick thing that wasn’t quite addressed by the previous panel: Why are so many foreclosures happening? Why isn’t the system naturally fixing itself? It’s an important question. The same predatory model that created all this bad stuff is the same model—it’s the same exact people, and it’s the same logic that’s supposed to try to mediate it now that it’s all collapsed. And, as we’re finding, they’re both irresponsible and incompetent in doing it. So Wall Street essentially acts as middlemen for these giant securitization bonds, and they’re supposed to handle these mortgages when they go bad. However, they’re paid first, out of any claim that happens afterward. They have no incentive to make sure these things work out. If you’re paid first, and you have no penalty if something goes under, what are you going to do? You are going to try to drive someone into bankruptcy; you’re going to try to drive the most fees on them, because you get paid those fees first.
So if you are a community activist and you’re looking at communities saying, this bank is incredibly aggressive in trying to get this person into foreclosure, even though, “Why do they want to own a home that’s going to be worth nothing with no one in it? It’s going to collapse.” The answer is they don’t care; they’re incentivized to do that.
There are ways to target that. In addition to forcing people into foreclosure very quickly, they’re not creating the paperwork necessary to foreclose—this is why you hear about the robo-signing scandals. If you’re going to be involved with Occupy Foreclosure, it’s worth taking a weekend and just educating yourself on what we’re referring to as foreclosure fraud. There’ve been a lot of primers on it—Yves Smith at Naked Capitalism; Dave Dayen at Firedoglake; the Huffington Post. Essentially, the banks are not even bothering to do the basic legal minimum. So what does that mean? Dave Dayen talked to a Register of Deeds in North Carolina. The Register of Deeds is not a radical person—this is one of the most boring civil servants you can imagine. But this guy became—in some small circles that I follow—Public Enemy #1 of the banks, because he actually went into the deeds and said, “You know, the banks have destroyed all these records. They haven’t submitted any of them correctly, and everything’s kind of wrong about them.” The amazing thing is that after he started asking questions, he was invited to meet President Obama two weeks later; it’s a totally amazing story. The Attorney General in Nevada said, “We’re going to pass a law saying, ‘If you submit incorrect documents for foreclosure, that’s a criminal penalty—and it actually sort of was already one, but we’re going to reemphasize that we will enforce it now.’” The moment they did that, foreclosure stopped across the state. Nevada is 70 percent underwater, the highest foreclosure rate possibly in history, but certainly in the country. Foreclosure just stopped immediately, because the banks are just not equipped or interested in following the rules—very bank-friendly rules, incidentally. As opposed to the Obama Administration, or certainly people in administration who maybe want to end up on Wall Street after the administration’s over, the Register of Deeds is not going to retire to a vice presidency at Goldman Sachs, right? The Attorney General of Nevada is probably not going to end up working for the Bank of America. These are people who see the devastation in their neighborhood, in their community, in their state; they want to work to try to fight them. So there’s a lot of room for cross-collaboration on the state and local level for foreclosure relief.
Last quick point on student loans: If I am driving around while texting, and I negligently run over and kill a child, or if I am in a gambling institution and I have an 11 and the dealer has an ace, and I mistakenly double down and get a huge gambling debt—those kind of debts—hurting someone, killing someone, gambling debts—are treated less harshly under our bankruptcy code than the debts associated with trying to educate yourself. Student loans are the most repressive debts under the legal structures that we have. These are democratic bills! People voted for them. Hillary Clinton voted for the 2005 bankruptcy bill. Biden voted for it; Biden pushed it. These are things we have chosen, and they are incredibly repressive.
Why are they exploding now? I think there are two things: One is generational. One-third of people under 35 have a student loan. That’s across the whole population, not just college graduates. Young people are just much more likely to have student loans and to have a higher amount of them. Across the board they have higher loans—it’s not just rich people who go to medical school and have high debts and that’s throwing off the statistics—across the board you see a real growth in student debt. It is truly a generational problem in the way that people over 40 or 50 just don’t have the right metrics to understand. Then, separately, I’d like to point to this one thing—the IMF went to Egypt three days before Arab Spring broke out there, and these two nice economists were giving a presentation, saying, “Hey, maybe you want to be worried about youth unemployment. It’s about 22 percent as far as we can estimate it here, and across the MENA, the Middle East, North African region, it’s in the twenties somewhere—some are high teens, some are like thirty, but in general it’s something to worry about.” Right now in the US the unemployment rate for 16 to 19 year olds is 24 percent. For 16 to 24 years old it’s about 19 to 20 percent, or what it was in Egypt when the IMF was warning about revolution. Now, the MENA region has a huge amount of young people, which is probably why it’s a bit more explosive there. But here the unemployment crisis is hitting young people, and even young college graduates who have unemployment rates 9 percent above the national average, in a way that’s just really, really harsh, and I don’t think the national media quite understands that. These would be explosive and important issues even if there wasn’t a massive unemployment and economic crisis. But there is.
Taylor: To sort of massively oversimplify: the banks are taking our money—that we’re paying them—and they’re lobbying with it. Right? So what do we do?
Konczal: I still think just creating energy and creating visibility around these things will make a big difference. Occupy working with community activists on foreclosure events, as far as I can see, is quite amazing. It’s great to see that kind of energy work out. I think there’s actual room to work with civic and local and state authorities—either to put pressure on them directly or to see what kind of pressures are available, what avenues are available. Because their incentives are way different than the Democratic Party, way different than the Executive Administration, way different than the Senate or whatnot. They’re the people who live with the consequences of these things.
Jaffe: I just wanted to say, specifically on the student debt issue: a few months into Occupy Wall Street, Arne Duncan, the Secretary of Education—not one of my favorite people—he’s a very school reform, pro-charter schools, pro-corporate, quasi-liberal Democrat—made a statement and said we need to sit down and we need to really think about this student loan crisis. To some degree, yes, being public about it, not being ashamed about it, telling your story, admitting that these things are a problem, and making some noise about it is on its own creating some movement in this administration on the local level, on the state level. Also, I just wanted to give a lot of love to Catherine Cortez Masto in Nevada. And Eric Schneiderman! We have one of the good guys in this state! We have one of the good attorney generals.
Kalkbrenner: The Occupy Student Debt campaign is doing a lot of outreach work to campuses across the country and is making a lot of connections to other activist groups. Here you have a massively organized group that’s ready and able to work on this campaign. You provide a conduit for people to get involved with it and change will happen.
Taylor: David, should we just abandon the concept of debt altogether?
Graeber: Well, yeah. There are stages. One of the critical things I’d really like to know right now and that I think would be really useful to spread as far and wide as possible is how much of the average American’s life income ends up getting expropriated by the financial sector. I’ve been trying to get these numbers and, sure enough, they’re almost impossible to come by. One thing I’ve been really fascinated by with Occupy Wall Street is why is it that the plight of the recently graduated indebted student suddenly speaks to a New York transit worker and all these other people who’ve been in solidarity with us? Which it probably wouldn’t have done thirty years ago.
I think there’s a fundamental shift in the nature of capitalism, where some people are still using a very old-fashioned moral logic, but more and more people are recognizing what’s really going on. They just don’t know the extent of it. It’s not even clear that this is capitalism anymore. Back when I went to college, they taught me that the difference between capitalism and feudalism. In feudalism they take the money directly, through legal means, and they just shake you down, pull it out of your income, and in capitalism they take it through the wage, in these subtle ways. It seems like it’s shifting more toward the former thing. The government is letting these guys bribe the government to make laws where they can pick your pocket, and that’s pretty much it. The best figures I’ve seen indicate that maybe 19 to 20 percent of incomes are now going—if you count interest payments, if you count all these fees they put in there, if you count insurance fees, if you add everything up—they’re taking about a fifth of your total life income. For nothing. For financial services of one kind or another. And of course, that hits some people more than others. So if you’re looking at these gross numbers, that means that for anybody who isn’t prosperous, it’s a lot more.
The other interesting thing I saw, however, is that that number shrank really rapidly. I saw 13 percent actually goes in interest payments—13 percent of people’s income—and that went down to 9 percent in two years since 2008. There is massive popular resistance on the individual level, just detaching yourself as much as possible from credit card debt, from the other more extortionate payment loans, other more extortionate forms. So it’s happening. People are starting to do it, just out of sheer necessity. I saw the figures; it was crazy—it went up, up, up, and then [exploding noise] like that, over the last two years. The challenge is giving political voice to what people are already doing by pointing out that they’re not alone, and also just point out what’s going on.
Taylor: OK, it’s question time. We have a few minutes here for questions.
Audience member 1: I just have a question regarding the tuition raise: Why is it 400% within the past twenty years? Is there a logical, layman’s term answer for that?
Kalkbrenner: I don’t know if there’s a simple answer for that. But it’s a good question—I’ll point out that up until the ‘‘70s, CUNY was free. And so was the University of California system. There’s a lot of reasons why wages are stagnant and why the increase is so much, but it’s interesting—at the Baruch action last month, which happened the same day we launched our campaign—you probably saw the Baruch students being attacked by police—as we were walking to it, I overheard somebody saying, “What’s the big deal? It’s $300”–because CUNY had voted to increase tuition by $300 every year for the next five years—and so, well, anybody who knows, anybody who is in debt knows that the difference between paying one bill and another bill, and on top of that paying $1,500, is a hell of a lot of money, especially for what’s supposed to be a university which serves a low-income and also middle-income student body.
Jaffe: I was not that recently a graduate student and also a teaching assistant. One of the things about these university tuition increases is that the place they’re not going is in professors’ pockets. The place that they are definitely going is in administrators’ pockets. Universities are moving in large part, especially public universities like the one I taught at, to teaching assistants and adjunct professors who don’t have health insurance, don’t have benefits, make three grand a semester, and they’re cutting down on permanent faculty. So this is the other part of that equation: you’re not only paying more money, you’re getting a worse product.
Konczal: I just want to throw out a quick point just as background—a lot of pre-Zucotti Park occupations, globally, have been about student debt. If you look in Chile over the last couple years, if you look in Puerto Rico—which is part of the United States, but—if you look at Britain last year, if you look at Berkeley in 2009, “Occupy Everything, Demand Nothing”—student debt is obviously a real crucible of where a lot of this energy is, so it’s exciting to see it come back to the campus.
Graeber: I was involved in the occupations in the UK last year. It’s a basic moral question of value, of why we’re even here—not only here in this room, but here at all. It was fascinating to see, because they’re trying to put in place in the UK the system that we already have in America. It started with this thing called the Brown Report, where they did an analysis of educational efficiency, based on the assumption that no one would every pursue a degree in higher education for any reason other than increasing their average life income. Then they proposed all these horrific neo-liberal reforms, like, we’ll triple tuition and put in student loans, which basically had the effect of making sure that people actually would be forced to act in exactly the way that the Brown Report described. You really had no choice, now, but to calculate everything in terms of your life income, because you were going to be in debt for the rest of your life. That was the point.
Every single occupation began with—it wasn’t a demand, but a statement—the statement that education is not an economic good, it’s a moral good: it’s a good unto itself. It’s crazy that positions that used to be conservative positions—I mean, you could say, “Education is necessary if you’re going to have a democracy; people need to be informed.” You could say, “Education is economically necessary,” if you’re a neo-liberal. But what about, “Education is good. It’s better to understand the world than not to understand the world”? That used to be what conservative people said. And now just trying to make this argument makes you a crazed radical.
What I really think has happened to the talk of education in particular is a question of value. An educational system is where you explore any value other than the economic, where it’s okay to do so. For most people, you live a life for a few years where you get to think about something other than money. And the guys running the money completely fucked up the entire system. They almost sent the economic system of the world crashing to its knees. It’s clearly a moment where people start thinking of other ways of thinking about things, other things being important in life, other ways of imagining the economy—where’s that going to come from? The educational system. So the first thing they do is—splat—attack the educational system head-on, to make sure nobody in that system can think about anything except the terms that have already been set up. It’s just using brute force to enforce ideological hegemony. We need to recognize that that’s what’s going on.
Audience member 2: I really like this idea of debt as a political thing; however, I signed the faculty pledge. I teach at a small private college, and we announced this. We were basically shunned and almost silenced by the rest of the faculty members who said that we were pushing students to be irresponsible. And as an educator, I feel kind of responsible, because I’m not going to be there when the student will be defaulting and her wages are garnished. I’m not taking my signature back, but I still feel responsible, and how do we solve this ethical dilemma? Because I’m not going to be there when the student is in trouble.
Audience member 3: This is a devil’s advocate question, mainly for David Graeber, but if anybody else wants to answer it, feel free. Current crisis aside, is the goal, in your mind, a society where if someone gives you a truck and you said you’re going to pay them $50,000, and then you don’t want to or can’t, people shouldn’t expect that you feel obligated to fork over the cash at any point in the future? Is that sort of the goal?
Graeber: No, I’m not saying that. I’m saying we need to reset our entire conception of what money is, of what people’s relationships are. Basically what a debt is is making a promise, making it impersonal and quantifiable, enforcing it coercively and therefore making it transferable, which is arguably what money is, too. They’re deeply entangled in one another. It is the nature of all promises that they are both commitments one makes to another person and also, if circumstances radically change, they get to be renegotiated. You can make a system where they can’t, by this combination of math and violence. What I’m talking about is bringing us away from the strange idea that these particular types of promise that are framed in math and backed up in violence are somehow more sacred than promises that one makes to someone which represent an actual type of trust, which, by nature, are renegotiated if circumstances change. If you lend your brother $50,000 for a truck, and your brother suddenly gets wiped out by a flood, you’re going to take that into consideration. So, the jubilee—if we have a system that’s utterly out of whack, it’s a way of setting the reset button. How we then renegotiate obligations to each other, what sort of promises we make to each other in a truly free society is a very interesting question, and I don’t think it’s going to look anything like what we got now.
Taylor: Okay, we’re going to do lightning-fast questions—a few of them at once—and then answers.
Audience member 4: On that last point, David, another way to think about debt is to think about it as a framing, and using the 1%’s framing, but trust in many ways—from all I’ve heard in the past week, there’s been so many discussions and conferences—one of the commonalities is that we’re building new networks of trust. So if you’re talking about human nature and being an observer of it, what would you say are some of the ways we can go onward in terms of building trust?
Audience member 5: My question’s for David Graeber. In the recent New York Times article, they said that basically you’re a person who thinks things have to get worse before they get better—
Graeber: They did?
Audience member 5: Yeah, yeah, they did.
Graeber: Who said that?
Audience member 5: The New York Times Review of Books! They said that you’d also deny it, if you were ever confronted about it. But I just want to see if you would say something about whether or not you actually do believe that. And if you do believe it, I actually agree with you, because I think that some of these petty millionaires and upper middle class people who think they’re still part of the system, that they’re protected by it—which looking around this room, I think that probably covers a lot of people here—need to realize that they don’t care about you and you will be cut out.
Audience member 6: OK, hi. There were two assumptions that were unspoken behind a lot of what was said: One was that the economy of the US exists unto itself and the other is that debt is just an idea or a moral contract that could be forgiven. The example was given of the Depression—debt being forgiven, and this being part of what got us out of the Depression. I would propose that WWII and the swooping up of former British colonies for the US had a lot more to do with getting the US out of the Depression and actually affording the kind of forgiveness to certain sections of people and the creation of the middle class. Similarly in the ’70s, the creation of the IMF had a lot more to do with mediating those neocolonies than just a moral reversal of debtors or creditors. And to this I would like to hear a response. The problem seems to be the existence of capitalism in an imperialist, globalized form today. There is still a need for actual revolution, to shatter that system and to create a different world.
Graeber: OK, you want the thirty second version of that?
Audience member 7: I just wanted to add on a little bit onto what David was saying. I was the president of the University of London student union last year, I’m involved in the student protests—hi, David. One of the things about the $9,000 a year fees—the government set that as an upper limit in order to introduce an element of competition within the education system so that some can charge higher than others, and, of course, all universities now are going to charge the top fee because nobody wants to seem to be providing a lower-value package, if you like. What the interesting thing about this is that the government, who are the ones who have to underpin all of the loans that the students are going to have to take out, aren’t going to be able to afford to provide those loans in the first place. Therefore students default, the government is going to default, and I think what we’re going to try to do is push something very similar to what you’re doing here, a mass non-payment campaign, because we know they work—it worked over the poll tax riots in Britain—and we know that what we have to do is push the political agenda forward. We know that they can afford our education if they can afford to bomb Libya. This came to a head last year when we challenged the Lib-Dems who put it in their manifesto—“Free education, we promise, we promise”—and I think something similar is going to happen here. All these politicians in the parliamentary system will just say whatever you want to hear in the run-up to the election, so we must hold them to account at all times, which has been well done over here. It’s been inspiring.
Graeber: It’s an interesting question, when you talk about the morality of debt—why is it that everybody says, “Oh, if you were to cancel debts, who’d make a loan, come on, the economy would suffer,” but nobody ever says, “If politicians break their promises to people—because they think that you have to pay debts to bankers and that’s much more important—well, nobody’s going to vote, and that’ll be the end of democracy.” Even though that’s exactly what happens. Why is one type of promise considered, “Oh, you can’t break that,” and the other is just made to be broken, even though we’re all a democratic society?
Taylor: So there were a few questions that were directed at you, and then there’s the question of professorial authority to student debt and solidarity with students, and I feel like that’s an interesting thing to think about.
Kalkbrenner: I’ll just say quickly that that’s a criticism that’s been leveled at us before. One of the professors involved with the campaign, there was a call from—I believe it was the Chronicle of Higher Education—a columnist called for a gag order on him, which was great publicity for us. I think I would say this: We’re not encouraging students to default, and we’re not encouraging debtors to default either; we’re encouraging debtors to take action. The pledge calls for people to refuse payment after a million people have signed the pledge. When a million people sign that pledge, the landscape is going to be radically different. So we need to think in terms of what it’ll look like, not what it looks like now.
Konczal: The thing about a debtor strike, especially a student loan strike, is that if you compare it to the logic of a factory strike—why does a factory strike work? It’s because the capitalist, the owner of the factory, wants the factory to be running. The first day he shows up and no one’s producing anything, he’s really upset. And then it’s a contest to see who can hold out the longest for what favorable terms.
The first day with a debt strike: Well, credit cards are the easiest things. If you miss a credit card payment, fees go up, your rates get jacked up, the owner of the debt is actually happy. It’s a long story but it’s pretty obvious: He can just jack up the amount you owe to him at that point. The same is true about student loans, like the story that Astra opened with. At the beginning of the strike, no one’s mad. The capitalist, who’s essentially the rentier in this case, is not upset about it; they’re happy about it. It goes with what David is saying—are we really in a capitalist society at this point with all this kind of stuff? Or is it more like a feudal society, where the idea of the debts growing is actually very favorable to an ownership class? That’s actually true of mortgage debt, too.
The other thing is about who’s on the other side—it’s the government; it’s us. We backstop most of the student debt. Why is that problematic? Well, there are things that social democrats like about having the government do things—it has a long time frame; it can print money; it has coercive abilities and compulsion. The flipside of that is that when the government uses those powers to become your debt collector, it’s incredibly repressive. They will find you wherever you go. They can take money out of your old age pension. They ultimately have no timeframe and no horizons, so they can wait you out. Whereas a normal credit card company would try to get your money and try to get you out the door, the government has an infinite timeframe for the person’s collection. So it’s a much more vicious type of debt collection. That’s one of the reasons why breaking the student loan models we have right now has to be one of the highest priorities for us.
Graeber: I think that we have to think of the system in a global context, absolutely, and we haven’t been emphasizing that here but I think all of us are well aware of that. We have this paradoxical situation, where you have what some refer to as debt imperialism. Well there’s an old joke: If you owe a bank a hundred thousand dollars, the bank owns you; if you owe a bank a hundred million dollars, you own the bank. It’s sort of the same thing: If Mozambique owes money to the US, Mozambique is in trouble. If the US owes money to Japan, Japan’s in trouble. It really depends on who’s got the guns. I’ve actually traced it out—you can look at the increase of the US deficit, the increase of the proportion of it that’s held abroad, and the increase in US military spending. It’s exactly the same curve. So basically what’s happening is that foreigners are paying for the US military that sits on top of them by making loans that are never paid, and just rolled over at a loss, and through Treasury bonds which act like gold and replace gold as the reserve currency of the world banking system, mainly spearheaded first by West Germany, when they were occupied by the US Then Japan, Korea, the Gulf States. Japan, China, even countries like Brazil are getting in on the game. (Of course it’s complicated. China seems to have a long-term strategy to hollow out the US and turn it into a military enforcer for East Asian capital.) We have this curious system whereby the US has this gigantic empire, which we can’t call an empire, the places that we occupy are sending us money, which we can’t call tribute so we call it a loan. And somehow we’re supposed to think this is just a problem with the balance of trade, that these guys are just sending us more stuff than we’re sending them, and, “It’s a real problem, isn’t it? We need to really do something about that!” It has nothing to do with the fact that we have this gigantic army sitting on top of them. If you suggest ways that it might, you’re a wing nut. We need to really make those connections—the whole money system has been linked to military systems for at least since the foundation of the Bank of England in 1694 and really much further back. That’s one of the things that an analysis of capitalism hasn’t really adequately addressed, how all those things are interlocked. I think that system is in crisis right now—that link between the military, what they call seigniorage, which is the term they make up for the economic advantage you get for being the guy who decides what money is. Which is essentially one of the big bases of American global power. It always seems to accrue to the guy with the biggest army. There is a crisis of that. We tried to pass off the crisis of the ’70s onto the third world. I think they fought back relatively successfully—the IMF has been kicked out, has come home. What we’re really witnessing, I think, in all of these social movements—and this is really a cheap cartoon version—is the struggle over the dissolution of the American empire and what’s going to replace it. I think we have reason to be optimistic. Because look at Europe! They lost their colonial empire; it’s not like the rich grabbed all the cookies. They ended up with health care and social security and welfare state.
[Inaudible question from the audience]
Well, yeah, the immediate effects were pretty good. I’ll take thirty years of progress. The dissolution of empires does not necessarily mean that the 1 percent grabs everything. They’re certainly trying. But I think that’s the ground on which we’re fighting.
[Inaudible question from the audience]
Well, it didn’t lead to universal revolution but it sure did change.
[Inaudible question from the audience]
Oh, absolutely! Nobody’s denying that. What we’re saying is that the dissolution of direct e