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Debt: Ethics, the Environment, and the Economy

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From personal finance and consumer spending to ballooning national expenditures on warfare and social welfare, debt is fundamental to the dynamics of global capitalism. The contributors to this volume explore the concept of indebtedness in its various senses and from a wide range of perspectives. They observe that many views of ethics, citizenship, and governance are based on a conception of debts owed by one individual to others; that artistic and literary creativity involves the artist’s dialogue with the works of the past; and that the specter of catastrophic climate change has underscored the debt those living in the present owe to future generations.

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1: Debt

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Richard D. Wolff

Across the United States, unsustainable debt helps force millions out of their homes, undermines consumption, prevents the extension of new credit, and in these ways sustains massive unemployment. Record volumes of personal bankruptcies intertwine with debt-driven collapses of banks, hedge funds, insurance companies, and other financial as well as nonfinancial enterprises. Even government debt in rich industrial economies has reached problematic levels, provoking political confrontations in the streets of Europe and elsewhere, forcing far-reaching political and economic changes. Debt is everywhere central to capitalism's current, global crisis.

Debt is thus very much on today's social agendas and nowhere more so than in the United States. Yet sober assessments of the complexities of debt and its social effects are rare, and rarer still are analyses of the role of capitalism in generating unsustainable debt. Urgent and intense ideological, economic, and political stakes are involved in how debts—and especially unsustainable debts—get resolved. After all, history offers many examples of debt contributing to the collapse of civilizations from ancient Rome during the period of slavery to feudal Europe. Might it be contributing to the decline of ours? And if so, is someone or something to blame? Can the debt “problem” be corrected or fixed, and at whose expense? Given the role of the United States in world affairs, the effects of a US debt problem extend well beyond our borders. Moreover, the position and impact of debt in the United States parallel its positions and impacts in many other countries.

 

2: “I Consider it Un-American not to have a Mortgage”: Immigrant Home Ownership in Chicago

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Immigrant Home Ownership in Chicago

Elaine Lewinnek

IN A 1953 New Yorker article, E. B. White fantasizes about accompanying Senator Joseph McCarthy on a trip to Walden Pond to investigate whether Henry David Thoreau was a communist. The trip gets off to a poor start because White's fictional McCarthy doesn't enjoy fresh air or walking, and then McCarthy is told that Thoreau had no mortgage. “I consider it un-American not to have a mortgage,” declares the senator in E. B. White's humor piece. “Besides, it's probably a lie.”1 It's a fascinating sentiment, succinctly combining ideas about debt, citizenship, and the unreliability of historical financial evidence.

When White puts this comment attacking a classic American individualist into the mouth of an imagined McCarthy, he does so to make a joke and to mock McCarthy's witch hunts. But it wasn't a joke when Thoreau's own friend Ralph Waldo Emerson lamented, at Thoreau's funeral in 1862, that Thoreau “had no ambition.” Instead of becoming a business leader—which probably would have involved going into debt—Thoreau had been content to be merely “captain of a huckleberry-party.”2 That is a remarkable thing to say at a man's funeral. But just how un-American or unambitious was it to live a life without debt?

 

3: Demonizing Debt, Naturalizing Finance

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Mary Poovey

THIS ESSAY SEEKS to illuminate several chapters in the history of debt. I am not primarily concerned with tracking the fluctuating totals of monetary debt, whether for nations or individuals. Nor am I primarily interested in the spiritual dimensions of debt. While I will argue that both calculative and theological frameworks figure in the history of debt, their prominence (in absolute terms and relative to each other) properly belongs to the history of the connotations of debt—the historical matrix of interpretive frameworks and meanings by which debt has been understood over time. To recover even a schematic overview of this matrix—as I seek to do in the first section of this essay—is to resist any claim that debt is a natural or inevitable part of the human condition.1 It is also to claim that as the frames by which debt is understood change, so too can debt be transvalued—changed, for example, from an ordinary part of everyday experience to a moral failing to be avoided at all cost, or changed again, from an ethical lapse into a financial opportunity.

 

4: On Debt

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Michael Allen Gillespie

THE NOTION OF debt is rooted deeply in our understanding of ourselves and our world. This becomes apparent if we reflect for a moment on the old philosophical saw, Ex nihilo nihil fit, “Nothing comes from nothing.” Or to put it another way, everything comes to be from something else. Nothing is self-made or sui generis, and every individual thing is thus indebted to something else for its being.

The first to examine this idea philosophically was Anaximander of Miletus, who lived from 610 to 546 BC. Anaximander was the student of Thales, also a Milesian, who is generally regarded as the founder of Western philosophy and science. Thales is best known for his declaration that everything arises out of water. To most people today this notion seems ludicrous, and it is consequently difficult for us to take him seriously. What could he possibly have meant by such a bizarre claim? To make sense of Thales' assertion, it is important to recognize the cultural limitations of the Greek world in which he lived. The reigning cosmological notion, articulated in Hesiod's Theogony, that the cosmos originated out of the coupling of Mother Earth (Gaia) and Father Sky (Uranos) was fundamentally anthropomorphic. Thales' assertion, by contrast, is decidedly materialistic. Moreover, as Friedrich Nietzsche pointed out, Thales' assertion has to be understood within the linguistic possibilities of his time.1 What he was actually trying to say was something profound and important—that every individual thing arises from and consists of undifferentiated matter or being—but every time he opened his mouth to express this glittering insight, all that came out was “water.” Twenty-five hundred years later we have learned to say “matter” or “energy,” but in a fundamental sense we have not gone very far beyond Thales' brilliant beginning.

 

5: The Growth Imperative: Prosperity or Poverty

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Prosperity or Poverty

Joel Magnuson

GENERATING A MEASURABLE rate of return for investors is the core element of any capitalist economy. Investors derive their income from percentage returns on stocks, bonds, or other business investments. If investors do not get these expected returns, they will sell their investments and seek returns elsewhere. By disinvesting, or cashing out, investors can drive down the book value of a company, which can ultimately cause the business to fail. To prevent this outcome, the prime directive of a capitalist business is to sustain robust returns and growth of financial wealth for their investors. This is the paramount goal of capitalist enterprise.

To provide these returns for their investors, businesses essentially have three choices. One would be to pay investors with money held in their business bank accounts. This choice, however, would amount to self-impoverishment, as businesses would make themselves poorer by drawing down their bank account balances, just as a person would become poorer by trying to live on a savings account. Another choice would be to generate profits from sales growth gained by taking market share away from competitors. Although the threat of losing market share in a competitive marketplace can force an individual business to be innovative and create new cost-saving technology, one business's gain is another business's loss in a zero-sum strategy. This would ultimately be self-destructive to the interest of the capitalist class as a whole. The third and only viable, long-term choice would be for each business to generate its returns by producing and selling more goods and services for profit.

 

6: Democracy's Debt: Capitalism and Cultural Revolution

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Capitalism and Cultural Revolution

Stephen L. Gardner

SINCE THE FRENCH Revolution, writers Left and Right have famously lamented the nihilism of bourgeois society. Take the Communist Manifesto for example: “Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into the air, all that is holy is profaned, and man is at last compelled to face with sober senses, his real conditions of life, and his relations with his kind.”1 Thus Karl Marx channels Joseph de Maistre. Tellingly, though, the sentiment of this famous passage is conflicted. Marx's scandal at bourgeois society betrays sacred terror of its revolutionary drive, suggesting even that it may be more radical than its socialist rivals. The specter of communism wants to rob the “bourgeois epoch” of its revolutionary genie, perhaps in order to stuff it back into the bottle at the same time. In any case, Marx reveals more than he realizes here. Even when he misses the point he sometimes has an uncanny ability to put his finger on it. What is revolutionary about the epoch is that it makes revolution itself its driving principle. There has always been but one revolution in modernity, and that (pace Marx) is the bourgeois one. Relentless and irresistible, it has accelerated mightily since Marx's time. The substance of its principle is equality, and its form is the market—things Marx elsewhere protests as not revolutionary enough. What his ambivalence perfectly crystallizes, though, is the Jekyll-and-Hyde character of modernity, revolutionary and counterrevolutionary at the same time, split into warring personalities.

 

7: Is Debt the New Karma? Why America Finally Fell Apart

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Why America Finally Fell Apart

Morris Berman

THE AMERICAN WAY of Life—which can be basically characterized as the union of technological innovation and economic expansion—has been mythologized or romanticized in various ways, and one of these is in terms of the story of Prometheus, a god of great energy who stole fire from Zeus and passed it on to mankind. It is a powerful image, and one that feeds the notion of American exceptionalism. What Americans tend to forget, however, is that there was a debt involved in this transaction. For Zeus was angry at Prometheus and had him chained to a rock, where an eagle or a vulture would come every day and eat out his liver. Since Prometheus was a god, the liver would regrow during the night, only to be devoured again the next day. Unfortunately for the United States, and contrary to popular belief, the country is not divine, and so its liver is now being devoured without possibility of regeneration. We can thus summarize the story as follows: first hubris, then nemesis—a fair portrait of the rise and fall of the American empire. Hubris incurs the debt; nemesis is the collection agency that comes to get the money back. A second allegory of the American Way of Life is the story of Dr. Faustus, who made a pact with the devil. “A Faustian bargain,” writes the Canadian author Margaret Atwood in her book Payback, “is one in which you exchange your soul or something equally vital for a lot of glitzy but ultimately worthless short-term junk.”1 Your soul, in other words, is the debt that has to be paid at the end of the day.

 

8: Measures of Time: Exploring Debt, Imagination, and Real Nature

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Exploring Debt, Imagination, and Real Nature

Julianne Lutz Warren

“WITHOUT MEMORY THERE is no debt,” writes Margaret Atwood in her 2008 book Payback—a series of lectures that explores debt as an imaginative construct. If the construct of debt requires memory, Atwood reasons, “debt [also] involves a plot line,” that is, a string of actions occurring over time, beginning with a handshake and heading toward a due date.1 It is increasingly evident that the human economy is reversing some of Earth's long-term trends. Modern conventional measures of a successful human economy have taken little account of the harmful consequences of such reversals. Many storytellers, however, have tried to incorporate nature's realities into their understandings of what it means for a human economy to be truly profitable for the long run. What might we learn, then, from such stories about the give-and-take between humans and Earth? Might they be helpful in reconceiving notions about debt in ways that are mutually beneficial to all life?

 

9: The Time of Living Dead Species: Extinction Debt and Futurity in Madagascar

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Extinction Debt and Futurity in Madagascar

Genese Marie Sodikoff

LIKE MUCH OF the science fiction of H. G. Wells, the short story “Aepyornis Island,” set in Madagascar, plays with the mutability of time and the specter of extinction. It tells a tale of the fabled “Elephant Bird” of Madagascar, a species larger than the modern ostrich that was overhunted to extinction by humans by at least the seventeenth century. An English collector, named Butcher, travels to Madagascar to find rarities for a buyer at a museum in London. He is stranded by his Malagasy guides and forced to fend for himself. By luck he finds in a muddy swamp the bones and several eggs of an aepyornis. To his astonishment, the eggs appear to be freshly lain. Starving, he eats two, and sees that they contain developing embryos. He allows one to hatch, and an extinct species is brought back from oblivion, albeit briefly.1

“Aepynornis Island” offers an entrée into the themes of temporal dislocation, the terrible reckoning that happens when living beings are “out of time,” and distortions in the evolutionist continuum between “primitive” and “civilized” in European imaginations. The story presciently captures the emergent sense of time forged by evolutionist thought and conservation practice and invoked by the contemporary biological concept of “extinction debt,” defined as a lag time between habitat perturbation and the species deaths that inevitably result from it.2

 

10: Unintended Consequences and the Epistemology of Fraud in Dickens and Hayek

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Eleanor Courtemanche

ONE SURPRISING AND unnerving result of the 2007–8 financial crisis has been the reactivation of the long-dormant Victorian debate about the difference between “investment”—a term that connotes fiscal soundness, prudence, and morality—and irrational, emotional “speculation,” which shades into “gambling” and which might be thinly disguised “fraud.”1 Given the increasing democratization of finance culture on both sides of the Atlantic, and the widespread vestment of prestigious pension funds and university endowments in growth equities, the thought of avoiding the stock market because of moral hesitations about gambling would, up until the late unpleasantness, have seemed positively medieval. It is easy to find places in Victorian literature where this distinction is represented crudely as one of personal character, with scam artists distinguishable by their Jewish or otherwise foreign mannerisms while the “gentlemen” cling to outmoded standards of philanthropy that may or may not actually make them money.2 In many of these novels you can detect who is moral and who is not simply by looking at their flashy clothing or noting their untrustworthy slang. One of the most frustrating elements of the recent crash, however, was the discovery not only that many investments made with perfect confidence were in fact deeply unsound in retrospect (something true of most scandals) but that as a result of inaccurate ratings by the credit ratings agencies it had become at a certain point impossible to tell the difference between sound and unsound investment. Contrary to previous crashes, the victims of the crash included not just the foolish individual investors who are the usual victims of financial scams but the investment banks themselves, which despite multiple safeguards seemed not to be aware that they remained liable for so many bad equities. As journalist Michael Lewis reports in The Big Short, “The big Wall Street firms, seemingly so shrewd and self-interested, had somehow become the dumb money. The people who ran them did not understand their own businesses, and their regulators obviously knew even less.”3 Anna Quindlen expressed this widespread unease in a 2009 column noting that “the great unspoken issue behind the tanking of the market, the mess in subprime mortgages and the bailout bill is that Americans don't understand the basics of the economy.”4 Because no one seemed to understand the complexity of the bad investments, government regulators had no choice but to turn over the cleanup to those who had made the bad investments in the first place.

 

11: The Resurrection of an Economic God: Keynes becomes Postmodern

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Keynes Becomes Postmodern

Michael Tratner

THE BUSH AND Obama stimulus packages have inspired numerous claims that John Maynard Keynes is back from the dead. But the resurrected figure is strangely different, rather literally a ghost of his former self, because what is most decidedly left out is the relationship of Keynes's economics to the human body. In the 1930s Keynes proposed economic stimuli in order to release “pent-up demand,” a concept quite close to the Freudian language of “pent-up desire.” The similarity derives from a common underlying notion of physiology, that human action starts with instinctual drives found in the body. One reason Keynesian economics went out of fashion is that neoclassical theory claimed that human action can be rational, so economists could ignore bodily drives. The recent crash has caused numerous economists to say that we need to restore a Keynesian notion of irrationality.

But something has happened to the very notion of irrationality in the new versions of Keynes: it is no longer a result of bodily influence on the mind but rather a result of discursive structures, of “conventions” and “stories” that people fall into believing. This shift in the nature of irrationality has broad ramifications: for one thing, it mirrors a change in biology itself, in which it has come to seem that patterns of information are primary, while fleshy or chemical structures are secondary. Probably the most familiar version of this shift is the role of DNA and the genome in biological theories, which imply that our fleshy bodies are essentially constructed from DNA patterns. In a peculiar way, this theory says that each human body is actually a representation, a copy, of an original that is stored simply as a symbolic pattern. Biologists such as Paul Grobstein have recently begun extending this notion so completely that some argue that the way animal and human bodies develop—their “morphogenesis”—is not simply a process of the “unfolding” of chemical and material processes but rather an “information-gathering process…[in which] each part of a developing organism acquires information about other parts; many, in addition, gather information from the external environment.”1 Every organ inside our bodies is now considered a minicomputer connecting to other minicomputers.

 

12: China and the United States: The Bonds of Debt

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The Bonds of Debt

Donald D. Hester

IN THE PAST twenty-five years the United States has had a growing balance of trade deficit with the People’s Republic of China (PRC). Beginning with the 1971 reestablishment of diplomatic relations between the two countries, international trade between them expanded, first slowly and then rapidly. In 1985, US imports of goods from and exports of goods to China were modest and relatively equal, while in 2009 the trade deficit in goods was more than $226 billion.1 This essay examines the distinctive features of this trade imbalance and proposes a crude game-theoretic discussion of what each country might gain and lose from their large growing financial entanglement in the short and long run. It also analyzes how US debts to and Chinese claims on other countries affect the relation between the PRC and the United States, and it concludes with a discussion of the paradox of a poor and rapidly growing authoritarian country financing an undisciplined and relatively declining democratic superpower.

 

13: Debt's Moral

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Kennan Ferguson

ACCORDING TO HEGEL, a quarrel about law arose between two ancient Roman jurists: Favorinus of Arelata and Sextus Caecilius. In response to Favorinus's contention that laws needed to be based on real situations, Caecilius showed that while law had to make sense, it did not actually have to go into effect.1 He gave the Roman law on debt as an example. If a debtor was unable to repay his loan, the creditor had the right to his body, that is, to kill him or to sell him into slavery. In fact, if a debtor owed several creditors, they could cut up his body and divide it among them. The very horror of the legal result, Caecilius argued, made the trust and credit system so secure that the legal particulars could exist without ever being carried out.

This particular debate can underlie a number of positions. For Caecilius it showed the nature of purely positive law; for Hegel it showed the need to synthesize the historical nature of law with its form; for the contemporary mind, it likely evokes a horror of such uncivilized practices. But for those of us attempting to better understand the dynamics and meaning of debt in their theoretical and historical contexts, this debate helps bring the extremities of debt, and of the burdens of debt, into focus.

 

14: Debt, Theft, Permaculture: Justice and Ecological Scale

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Justice and Ecological Scale

Gerry Canavan

IF, AS FREDRIC Jameson once wrote, it has become easier to imagine “the thoroughgoing deterioration of the Earth and of nature” than the end of capitalism, this is in part because we are increasingly aware that the two phrases describe in fact the same event.1 But the imagined extinction of alternatives to capitalism associated with Francis Fukuyama's “end of history” that so concerns Jameson carries with it a type of ideological shadow: if capitalism is, as K. William Kapp once put it, “an economy of unpaid costs,” then our increasing recognition that the bill is finally coming due must be recognized as a kind of nascent revolutionary consciousness.2 Bruno Latour, who in his most well-known book famously declared, “We have never been modern,” recently wrote that “it has now almost become common sense that we were able to think we were modern only as long as the various ecological crises could be denied or delayed.”3

 

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