Debt as Power THEORY FOR A GLOBAL AGE Series Editor: Gurminder K. Bhambra Globalization is widely viewed as a current condition of the world, but there is little engagement with how this changes the way we understand it. The Theory for a Global Age series addresses the impact of globalization on the social sciences and humanities. Each title will focus on a particular theoretical issue or topic of empirical controversy and debate, addressing theory in a more global and interconnected manner. With contributions from scholars across the globe, the series will explore different perspectives to examine globalization from a global viewpoint. True to its global character, the Theory for a Global Age series will be available for online access worldwide via Creative Commons licensing, aiming to stimulate wide debate within academia and beyond. Previously published by Bloomsbury: Published by Manchester Connected Sociologies University Press: Gurminder K. Bhambra John Dewey: The Global Public and Its Problems Eurafrica: The Untold History of John Narayan European Integration and Colonialism Peo Hansen and Stefan Jonsson On Sovereignty and Other Political Delusions Joan Cocks Postcolonial Piracy: Media Distribution and Cultural Production in the Global South Edited by Lars Eckstein and Anja Schwarz The Black Pacific: Anti-Colonial Struggles and Oceanic Connections Robbie Shilliam Democracy and Revolutionary Politics Neera Chandhoke Debt as Power Tim Di Muzio and Richard H. Robbins Manchester University Press Copyright © Tim Di Muzio and Richard H. Robbins 2016 The right of Tim Di Muzio and Richard H. Robbins to be identified as the authors of this work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. Published by Manchester University Press Altrincham Street, Manchester M1 7JA www.manchesteruniversitypress.co.uk British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library This work is published subject to a Creative Commons Attribution Non-commercial No Derivatives Licence. You may share this work for non-commercial purposes only, provided you give attribution to the copyright holder and the publisher. For permission to publish commercial versions please contact Manchester University Press. Library of Congress Cataloging-in-Publication Data applied for ISBN 978 1 7849 93252 hardback 978 1 7849 93269 paperback 978 1 5261 01013 open access First published 2016 The publisher has no responsibility for the persistence or accuracy of URLs for any external or third-party internet websites referred to in this book, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. Typeset by Integra Software Services Pvt. Ltd. For Verónica The Debt By Paul Laurence Dunbar (1872–1906) This is the debt I pay Just for one riotous day, Years of regret and grief, Sorrow without relief. Pay it I will to the end – Until the grave, my friend, Gives me a true release – Gives me the clasp of peace. Slight was the thing I bought, Small was the debt I thought, Poor was the loan at best – God! but the interest! Contents Series Editor’s Foreword ix 1 Toward a Stark Utopia 1 2 Origins: War, National Debt, and the Capitalized State 23 3 Intensification: War, Debt, and Colonial Power 47 4 Consequences: The Debt–Growth–Inequality Nexus 87 5 Solutions: A Party of the 99% and the Power of Debt 125 Appendix A 143 Appendix B 145 Notes 148 Bibliography 159 Index 186 Series Editor’s Foreword “Debt” is a seemingly universal and constant aspect of human experience and history. However, the social practices and economic structures that are involved need to be understood through the global interconnections that give form to its historical instantiations as well as its contemporary manifestations. This is the compelling claim of Tim Di Muzio and Richard H. Robbin’s book Debt as Power and, as such, fits perfectly into the Theory for a Global Age series that seeks to take “global interconnections” as the basis from which to rethink both conceptual frameworks and commonly held understandings. In Debt as Power, Di Muzio and Robbins present a historical account of the modern origins of capitalist debt by looking at how commercial money is produced as debt in the late seventeenth and early eighteenth centuries. They expertly demonstrate their key contention—that debt is a technology of power—and identify the ways in which the control, production, and distribution of money, as interest-bearing debt, are used to discipline populations. Their sharp analysis brings together histories of the development of the Bank of England and the establishment of permanent national debt with the intensification and expansion of debt, as a “technology of power”, under colonialism in a global context. The latter part of the book addresses the consequences of modern regimes of debt and puts forward proposals of what needs to be done, politically, to reverse the problems generated by debt-based economies. The final chapter presents a convincing case for the 99% to use the power of debt to challenge present inequalities and outlines a platform for action suggesting possible alternatives. This ambitious book is both a diagnosis of our current social and economic global condition structured by the debt–credit nexus and a clarion call to action. Action is necessary if we are to overturn the x Series Editor’s Foreword manifold miseries associated with debt and bring about a more equal distribution, not only of wealth, but also of societal well-being. It is possible, as Di Muzio and Robbins forcefully argue, that the very survival of humanity depends on it. Gurminder K. Bhambra 1 Toward a Stark Utopia Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness. Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganized industrial life, and thus endangered society in yet another way. It was this dilemma which forced the development of the market system into a definite groove and finally disrupted the social organization based upon it. (Polanyi 1944: 3–4) On November 20, 2003, in the rural countryside of India, Nagalinga Reddy, a farmer of rice and sunflowers, committed suicide. At fifty years of age, Reddy took his life by ingesting ammonium phosphate tablets—a pesticide used in modernized farming. His rice crops had just failed due to pests and he was deeply in debt to usurious moneylenders, three banks, and a cooperative. He was harassed regularly by his creditors, and he finally put an end to their tyranny by taking his life.1 But Reddy’s suicide was no isolated incident. Since 1995, there has been what can only be described as an epidemic of farmer suicides in India. The Hindu reports that from 1995 to 2010, 256,913 farmers have taken their lives—the vast majority by ingesting the very same pesticide swallowed by Reddy.2 According to the Center for Human Rights and Global Justice and P. Sainath, who has covered the epidemic in India, the common link between these 2 Debt as Power suicides is punishing personal indebtedness to local moneylenders and/or microfinance institutions (2011: 1; Deshpande and Arora 2010; Young 2010; Taylor 2012). But the epidemic has another contributing factor: the neoliberal reforms introduced in India in 1991. To regain the confidence of creditors in its burgeoning budget and trade deficit as well as mounting national debt, the Indian government accepted neoliberal reforms in exchange for a loan from the International Monetary Fund (IMF) (Chossudovsky 2002: 149ff; McCartney in Saad-Filho and Johnston 2005: 238).3 To ensure debt service to rich creditors, economic reforms hit many agricultural communities particularly hard. Many farmers experienced mounting costs for energy and basic inputs like fertilizer. These goods were once subsidized by the government, but with the turn to neoliberal austerity in the 1990s, farming was increasingly financed through the personal debt of farmers and their families. This politico-agricultural transformation has led to land dispossession, the concentration of land in fewer hands, and widespread farmer suicides (Mohanty 2005; Levien 2011; 2012; 2013). In the rural countryside of Thailand, we find another story of humanity in the global age. Nok is a woman raised in rural Thailand and a seemingly willful participant in her own trafficking to Japan. According to her own account, her father was deeply in debt to credit and agricultural cooperatives because the money the family made from rice farming was insufficient to repay the interest, let alone the principal. In this predicament, Nok’s older sister had agreed to be trafficked to Japan in return for paying a debt of 3.5 million yen (about $34,000) to her traffickers. She worked in the sex industry and eventually paid down her debt, enabling her to send more money back home. Nok soon followed in her sister’s footsteps and used the same trafficker to become a sex worker in Japan (Aoyama 2009: 85ff). Like the farmer suicides of India, this is no isolated incident. Countless Thai women have been trafficked not only to Japan and surrounding region but also to brothels in their home country. The practice typically begins when a family is encouraged to sell their daughter to a broker who promises Toward a Stark Utopia 3 to get them cash work in the city. The transaction is too often made so that the family can use the money to overcome economic hardship (e.g., to repay mortgages on rice fields) and even acquire some of the trappings of modernity (e.g., television and electrical appliances).4 This begins what can only be called a debt trap: The contractual arrangement between the broker and parents requires that this money be repaid by the daughter’s labor before she is free to leave or is allowed to send money home.