Debt Is Good

New Tools You Need to Survive Capitalism

Debt Is Good
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Everywhere you look, all you see are debts. They are in your pockets, your purse, your education, your car, home, dreams. I honestly have this nightmare regularly: A Bank of America credit card that has somehow completely slipped from the sphere of my attention suddenly reappears. It has been unpaid for months and months, and lots of fees have been stuffed into the incredible amount that's now owed. We wake up from such bad dreams to this bad reality: No matter how hard you try, you can't get rid of debts or even clear a small path that will lead you to the very heaven of debtlessness. Your debts only know how to grow and grow.

But why do we owe so much? How did we get here? "For wealthier households," writes Richard Dienst in his new book, The Bonds of Debt, "more debt is associated with greater ability to borrow for houses, durable goods, education, and so on. For everybody else, increased debt should be seen in the context of the persistent stagnation of wages, where borrowing against a house became the easiest and perhaps the only way to support consumption." And exactly what percentage of the American population is this "everybody else"—those who have not seen their real wages rise since the 1970s? Dienst, an associate professor in the Department of English at Rutgers University, offers the answer in another part of the smart and easily understood book: 90 percent of the population.

You must also picture the other 10 percent loaning money to this 90 percent for their contributions (labor, entertainment, cultural, intellectual, scientific productions) to this society. We often hear clichés like "life and debt" and "first you live, and then you are debt." People are quick to see and hear the word death in the word debt because both are generally recognized as bad things. And if not compared to the "Absolute Master," debt is compared to prison, a loss of personal freedom, a kind of slavery. But Dienst has a new and thrilling idea. From his perspective, debt is exactly what bonds us and makes our kind of sociality possible.

"A collective must always be indebted to itself in order to carry out any kind of production." With this insight, we can now understand what is at the heart of capitalism itself: It appropriates a given fact, our indebtedness, and transforms it into an economic machine that benefits a few people. "What characterizes capitalist societies, then, is the way that this collective indebtedness gets expressed in the generalized form of credit which shapes and mediates relations between individuals, states, and markets... What indebtedness makes possible, credit makes profitable."

The first three chapters of the book, which flesh out this concept, are brilliant. The later chapters, one of which is on Bono and his pathetic effort to save the world from poverty, are interesting. Late in the book, we are introduced to the fictionality of credit. The stunning success of this particular fiction resulted in what the Italian economist Christian Marazzi calls, in his book The Violence of Financial Capitalism, the "financialization of society." As we fell deeper and deeper into debt, and our wages refused to pull us up, more and more of our lives became tied up with banks and securities. In short, our world became the kingdom of Wall Street.

Marazzi is part of a great Italian intellectual, political, and cultural movement, the Italian autonomists, that has Antonio Negri (Empire) as its most visible figure. What distinguishes this Marxist movement from others is that it fully recognizes and develops theories that correspond with a capitalism organized around services, telecommunication systems, and computer processing. The factory order is an older capitalism. The new capitalism makes us not only work at work but also work when we are not working.

In Marazzi's dazzling little book (Marazzi is an economist by training and not a philosopher), an aspect of this "working when you are not working" is described as "coproduction." He writes: "Coproduction [is] where the individual is the coproducer of what he consumes." An example of this: "Ikea [delegates] to a client a whole series of functions (individuation of the code of the desired item, location of the object, removal of it from shelves, loading it into the car, etc.)." Along with coproduction, you also have to rent your "social rights." Again, because real wages have been flat, and the only extra money you can get comes in the form of debt, you in a way rent your wage increase. You also rent the right to have a place to live and the right to retire.

This system of debt, renting, and increased financialization is called neoliberalism. And the most sober and entertaining critic of this system is Ha-Joon Chang, a South Korean who teaches economics at the University of Cambridge and has authored and coauthored several books, the newest of which is 23 Things They Don't Tell You About Capitalism.

If you don't know Chang's work, then start with 23. It is all of his ideas and arguments compressed into a clear and delightful crystal. But before reading this book, I highly recommend that you watch him lecture on YouTube. This way, you'll have his manner of speech and comic timing in your head as you read his writing. Chang essentially believes that neoliberalism is a system that is ideal for those who have financial assets. Hence the rise of Wall Street (and hence the revolving door between Washington and Wall Street). But more than that, neoliberalism has distorted everything: It wants us to believe markets are free, when they are not; it wants us to believe that government planning is bad, when this is hardly the case; it wants us to believe that inflation is horrible, when often this is not so.

What does controlling inflation do? It keeps prices stable. But this stability is of first importance only to those who have extra money (low inflation maintains the real returns on their financial assets); those who have to work to make a living are more concerned about job stability—a stability that's dismissed by neoliberal policy makers. "The most destabilizing events in most people's lives are things like losing a job," writes Chang, "not rising prices, unless they are of a hyperinflationary magnitude."

In sum, 23 and the other two books present the reader with strong and new tools to cut the "mind-forg'd manacles" of our times. recommended


Comments (12) RSS

Oldest First Unregistered On Registered On Add a comment
Outstanding article, Mr. Mudede, outstanding article!

Now, while I would certainly recomment Prof. Chang's book, and all of Prof. Chang's outstanding books, as well as Marazzi's, although Dienst is on the light-weight side, you have missed the penultimate work on debt, Prof. Michael Hudson's Trade, Development and Foreign Debt; Hudson is the most brilliant macro and monetary economist in the western part of the planet, if not the entire planet. Most importantly, he has been correct on everything for the past 4 decades, at least!…)

Now, for anyone who doesn't have the coin (and doesn't that cover many of us) or time to read two or all three of these excellent books, or wishes to get quickly up to speed on debt peonage, neoserfdom and neofeudalism we are now and will be experiencing, I would recomment the following list -- in order -- for a comprehensive understanding (they are brief, except for the last two, the very last one consisting of Prof. Hudson's brilliant 10-page historical summary -- a bit dense, but truly enlightening and a must read!

[Damon Vrabel's 3-page brilliant explanation of the Global Banking Cartel]……

[Pam Marten's thorough explanation of recent events]…

[Ellen Brown's incredible explanation of the central banks control]…

[Prof. Hudson's masterful explanation of modern fraudster history leading to today]…

[David DeGraw's unique summary of recent and soon-to-be events]…

And, should any wish to pursue the subject further, a short reading list most appropriate to the present:

The Rich and Super-Rich, by Ferdinand Lundberg

The Predator State, by James K. Galbraith

Treasure Islands, by Nicholas Shaxson

Trade, Development and Foreign Debt, by Michael Hudson

Wall Street Capitalism: A Theory of the Bondholding Class, by E. Ray Canterbery

The Road Through 2012: Revolution or World War III, by David DeGraw

Brothers: The Hidden History of the Kennedy Years, by David Talbot

Death of the Liberal Class, by Chris Hedges

The Handmaid's Tale, by Margaret Atwood (fiction, but extremely pertinent to our times)

For the truly lazy, just watch the movie, The International, (Clive Owens & Naomi Watts), and pay close attention to the talk on banking and debt with the aviation CEO and Italian presidential candidate.

Posted by sgt_doom on April 21, 2011 at 10:28 AM · Report this
Oops! Forgot a couple of things, the trailer to The International, below,…

And Edward Jay Epstein's very thoughtful Harper's article from 1983 on the B.I.S.,…

Present Board of Directors of the Bank for International Settlements:

Christian Noyer, Paris (Chairman of the Board of Directors)

Masaaki Shirakawa, Tokyo (Vice-Chairman
Ben S Bernanke, Washington, DC; Mark Carney, Ottawa; Agustín Carstens, Mexico City; Luc Coene, Brussels; Mario Draghi, Rome; William C Dudley, New York; Philipp Hildebrand, Zürich; Stefan Ingves, Stockholm; Mervyn King, London; Jean-Pierre Landau, Paris; Baron Guy Quaden; Brussels; Fabrizio Saccomanni, Rome; Jean-Claude Trichet, Frankfurt am Main; Paul Tucker, London; Axel Weber, Frankfurt am Main; Nout H E M Wellink, Amsterdam; Zhou Xiaochuan, Beijing

And for Mr. Mudede's reading enjoyment:…
Posted by sgt_doom on April 21, 2011 at 10:53 AM · Report this
Anthropomorhpise Me 3
Inflation is devastating to the elderly because they are usually on a fixed income. Their benefits/ investments typically do not increase at the same rate as inflation.

One factor contributing to stagnant wages is the cost of healthcare. People who get their healthcare through their work are actually getting raises indirectly.

It amazes me that they do not teach a basic finance class in high school. People need to understand that the item they are purchasing is going to have a greater ROI vs. the debt they are taking on. Risk vs. Reward

If people are educated then Capitalism is a very effective but if they are not then Capitalism will eat them alive.

Collective/Communism/etc is for people who are not educated (or for educated who want to control everyone else).
Posted by Anthropomorhpise Me on April 21, 2011 at 12:31 PM · Report this
Seems like you are talking more about the pitfalls of fiat currency and fractional reserve banking than of capitalism.
Posted by cliche on April 21, 2011 at 4:06 PM · Report this
"For everybody else, increased debt should be seen in the context of the persistent stagnation of wages, where borrowing against a house became the easiest and perhaps the only way to support consumption."

if consumption is seen as necessary items because consumer goods aren't the cause of most debt. Elizabeth Warren's 30 year study of middle class spending shows that price increases for items like transportation, health care, child care, local taxes and fees, etc are the cause of the overall decrease in purchasing power for the lower 90% of income distribution, which combined with at best flat earning for many, translates into the need for debt just to maintain the same standard of living.
Posted by anon11 on April 21, 2011 at 5:08 PM · Report this
Thanks a bunch, #4, cliche, for answering #3, Anthropod.

I think what Anthropod was attempting to articulate is that criminal psychopaths are unsuccessful while bankster psychopaths are successful!

Say, #3, Anthropod, do bankster psychopaths get your panties wet? Just curious.....
Posted by sgt_doom on April 22, 2011 at 10:17 AM · Report this
The author is correct in calling debt bondage! I got out of debt a few years ago and I have more money and more freedom! Pay off that credit card and cut it up! Get your personal freedom back!
Posted by fieryfood on April 22, 2011 at 12:43 PM · Report this
The author is correct about debt being bondage! I've been debt-free for a few years and I have more money and more freedom than ever. If you want to break your shackles, pay off that credit card and cut it up!
Posted by fieryfood on April 22, 2011 at 12:55 PM · Report this
Oops! Sorry about the double post! Too many chile peppers for lunch...
Posted by fieryfood on April 22, 2011 at 12:56 PM · Report this
Anthropomorhpise Me 10
Sgt Doom,
1) I do not wear panties.
2) I did not realize that basic math and present value calculations were the domain of psychopaths
3) Robot Microwave Fish
Posted by Anthropomorhpise Me on April 22, 2011 at 2:42 PM · Report this
#7, 8 and 9, fieryfood, the posted links at #1 for specifically for ones like you, who only -- so far -- understand one item in a most complex territory. (Anthropod is too stupid and therefore beyond help.)

It isn't about your credit cards or individual line of credit, etc., ad nauseum, it is about all those debt-financed multibillionaires who have rigged the system by their debt-financed ultraleveraging.

Read the links....
Posted by sgt_doom on April 23, 2011 at 4:04 PM · Report this
Anthropomorhpise Me 12
Sgt Doom,
You are a poopy-head. I win.
Posted by Anthropomorhpise Me on April 28, 2011 at 8:45 AM · Report this

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