The power relations of debt: care and resistance

Daniela Tepe-Belfrage - Lecturer in Sociology, Criminology and Social Policy, University of Liverpool 

Johnna Montgomerie - Lecturer in Economics, Goldsmiths

Nancy Fraser reminds us of the dangers of ‘critical separatism’ – and unfortunately, separatism plagues most scholarly and public engagement with debt, separating public and private, state and household debt. This thinking undermines the fact that, again to borrow from Fraser, these strands are so interrelated that one cannot ‘be properly understood in abstraction from it’. We echo Fraser’s concern in our analysis of the social reproduction of debt and the way in which general crisis has been interpreted and discussed in abstraction from political and economic crisis. We argue here that the ways debts are ‘cared for’ constitute a growing part of social reproduction in financialised households. The emotional and material labour required to manage household resources to cope with indebtedness has thus become a crucial part of social reproductive labour for many households. Yet, the resources to manage this are not infinite. Rai et al.’s  work on depletion exemplifies the draining of resources resulting in a widely recognised crisis of reproduction.

Scholarly and public engagement with debt very often ignores how the power relations of debt manifest in different ways at different scales; rather than as linear projections of clear lines of power, i.e. a legal contract between a borrower and a lender. When looking at the power of debt we have to take account of its capacity to generate change in the material conditions of both public and private households where debt becomes a transformative force. Indeed, the temporal shifting of debt and how it materialises as an obligation to be cared for is what sustains the driving force of financialised expansion across the Global North. A particularly compelling example of this kind of analysis stems from research into how private households manage their debts on an everyday basis. Here, personal debt is often seen as a form of addictive behaviour, yet it is the compulsive dependence of financialised growth on rising levels of household debt that creates a specific pathology of crisis. Looking at it from a macro scale we see the individual ‘addictive behaviour’ as a systemic dependence on household debt to drive financial profits and aggregate consumption when real wages have been falling for decades.

This is also exactly how contemporary financialisation systematically integrates the household sector into the global financial system through the ‘originate and distribute’ banking model. As households regularly remit their income into the banking system via interest payments on mortgages and other retail lending, the social relations of debt become integrated into the vested political power of banks to pursue financialisation. As such, we cannot simply see debt as an extension of the wage relation; it is a power relation articulated through an array of social relations – class, gender, race, age and space/place. This is an important corrective addressed at many political economy approaches that rely solely on a Marxist notion of debt. Power is mediated through a variety of means that cannot be reduced to income generation via waged-work because debt creates dependencies through moral claims, triggers distinct emotions through shaming, enforces legal claims on assets and savings and determines market citizenships via credit ratings.

Furthermore, the spatial relations of debt means its claims moves across different scales. Let us take as our starting point the cost of credit (i.e. the interest rate) which since the 2008 financial crisis has been close to zero in the financialised economies of the Global North. The unevenness of access to cheap credit however is spatially bound within the major universal Banks and their relationship to the national Treasury and the Central Bank. Financial power is spatially bound within the major banks that inhabit the urban financial centres of London, Frankfurt, New York, Zurich and Tokyo exactly through this relationship. From here we can then recast the power relations of debt through the financial market practices of credit rating and risk-based pricing as technical practices that amplify existing structural inequalities. This is an important corrective to the Foucauldian line of argument that casts the technologies of risk-based pricing as the transformative dynamic fostering inequalities. Instead, these technologies amplify and legitimate the pre-existing structural inequalities. For Foucauldian approaches, debt and credit are interchangeable as categories for analysing financialisation. Their focus on subjectivities restricts them to seeing how debt and credit serve significantly different material outcomes depending on your class, race, gender, age and the place that you inhabit.

To exemplify this line of argument, it is well established how the wealthy (both in income and in assets) have the highest levels of debt in absolute terms, but it is those on the middle and lower end of the wealth distribution that pay more for credit, and their debt levels are more onerous as claims on household resources. Crucially, lower-income groups also generate less wealth from debt than those who take on debt in higher income groups. The spatial lens again becomes crucial to our understanding of the race-based power relations of debt. Those communities where racial minorities live pay more for credit of all kinds. For example, in the US the practice of ‘mortgage red lining’ and in the UK the localised nature of payday lending are the most pertinent examples of how racialised communities are seen as centres of profit for high cost finance. As economic geographers have stated repeatedly, homeownership is the key spatial fix for global finance. Therefore the power relations of debt manifest in a rural/urban divide where place matters as enabling unequal debt-financed access to housing and housing wealth.

The gendered power relations of debt articulate in a similar fashion, debt grafts onto the existing gendered relations and norms. When debt comes into the picture, the gendered and age-based dynamics of wage inequality, household task division, care responsibilities and access to assets become amplified. What matters is where and how debt intervenes in the intimacies of everyday life.

Research is needed into the ways in which private households manage debts on an everyday level, and how the ‘caring for debt’ is the progenitor of resistance to debt. Firstly, the emotional labour of managing debts, the ongoing acts of accounting, the deciphering of how much is owned to whom, the decisions around what changes to expenditure are required, whether these decisions are possible and whether they are worth it. These acts of ‘accounting’ make debt a recognisable force in the household, be it at the state or the private household level. Secondly, from these acts of accounting and reckoning comes a desire for freedom from the moral claims of debt as a pre-emptory claim against the resources of the household, again be it public or private. It is precisely the moral claims of debt, as more important than other endeavours, such as financing security and well-being that are thrown into question. Thirdly, comes the desire to act against debt, whether that is to pay it down, to divert expenditure, to default, to cancel or to pay it off. All these become strategies of resistance, as the moral high ground of debt is challenged.

To sum up, we argue for the necessity of moving beyond the unhelpful distinctions of private and public debt as two distinct phenomena. Indeed, we question the reified distinction between the state, the economy and society more broadly because in order to truly account for the way in which debt and the caring for debt is gendered, classed and racialised we cannot stick with these separatisms.