A quick comment may be appropriate on the subject of the so-called ‘rolling Jubilee’, a programme initiated by an organization calling itself Strike Debt. The purpose of this programme is to support debt relief for individuals. This follows up on the idea for a Biblical-type ‘jubilee’ of debt cancellation and nonpayment in the wake of the current crisis, one advocated for by, among others, the prominent anarchist anthropologist David Graeber and many of his followers around the Occupy movement, as well as by some of the post-Keynesian critics of the financial order, like Steve Keen. Whatever the merits or demerits of this proposal as such, the specific form of the rolling Jubilee is worth examining. The notion is here to use donated money to buy up junk debt for pennies on the dollar in the secondary market, and then instead of attempting to enforce the debt obligations, to abolish them instead. The website calls this ‘a bailout of the 99% by the 99%’, and as a fairly original and creative approach to using the financial markets for the purposes of radical politics, it has rightly garnered some attention.
But does it make sense? I would venture that it does not. It is certainly true that the nominal debt that can be forgiven in this way will be in almost all cases vastly greater than the actual price of the debt bundles, sometimes by as much as a factor 100. Seemingly then this is a ‘good deal’ for those seeking it for Jubilean purposes. But of course this fact itself reveals the limitations of using the financial market in this way. The reason this debt is so cheap in the secondary market is precisely because it is bad debt to begin with – debt that the creditor-owners do not expect to be able to actually reclaim, and which they therefore are in a hurry to get rid of. The nominal value of the principal is therefore totally irrelevant to the actual effect on the total debt burden of the population, as it is already a known inflated value compared to its actual value as a result of the bubble of subprime debt investment – precisely one of the major proximate causes of the current crisis. If one therefore buys up this debt for pennies, if anything this actually helps the financial capitalists who own it, by getting it off their books and thereby reducing the uncertainty associated with their assets. The fact that the debt is considered of minimal value indicates the debtors involved are not exactly in a position to pay it back, probably not even the interest on the debt; getting it off their backs will certainly be a psychological relief, and is for that reason to be commended, but its financial impact in more than the very short term will be limited. Moreover, one can doubt whether politically it is wise to use the financial system in this way – it still amounts to a form of debt cancellation with compensation at current market price for the financial capitalists, while a true Jubilee movement, to have any decisive political effect, must aim at doing so without compensation. Otherwise the effect of the Jubilee in terms of shifting the balance of political economy away from the creditors and financial institutions and towards the ‘consuming’ population is lost.
It is worth noting the Rolling Jubilee programme takes its inspiration from a document called the Debt Resistors’ Operations Manual, which is a useful almost book-length work on how credit works in the current economic system and how one can resist and minimize the effects of debt in the personal sphere. In the wake of the enormous increase in personal and household debt following the drastic expansion of financialization in the world system, this is a welcome approach. Nonetheless there is a problem of agency here. To take donations from individuals in order to undertake the Rolling Jubilee, which then bails out small numbers of random individuals in terms of forgiving their devalued debt, seems an exercise in futility seen from a larger perspective. As debt is generally bundled, especially in the secondary market, the Rolling Jubilee will have no power to determine whose debt is being forgiven, making it a very scattershot approach. Moreover, it essentially amounts to minor transfers in the sphere of distribution, and thereby suffers from the distributionism generally characteristic of the political ideas that have come out of the Occupy movement, which I have written about before. It will certainly have no effect whatever on the political or economic position of the great financial institutions, nor will it do more than distribute small sums of money from individual donors to small debtors and dealers in CDOs and the like. Finally, it will do nothing to address the causes of the ‘consumer debt’, e.g. the costs of education, the mortgage scams, the stock-jobbing with pension funds, and so forth. This is not a self-evidently desirable result, nor a self-evidently desirable political method. Indeed, it may well inspire other, more direct, forms of debt resistance and support the more general call for Jubilee. But it is not at all clear that these minor distributional issues really lead to a general debt resistance any more than donating to charity contributes to building a movement for a general strike.
All this is not to claim I have no sympathy with the aims of the Strike Debt movement, and the topic of Jubilee is one worth exploring further on some other occasion. It is almost certainly as a general idea one of the strongest classic transitional demands to come out of this crisis and the Occupy movement in particular – strong, because it is immediately understandable (most people experience debt in one way or another), aims at a target that is relatively concrete rather than abstract (debt instead of value), one whose ‘solution’ would nonetheless have a major effect on the power relations of existing political economy and would greatly shock the ability of capital to reproduce itself on the basis of at least the current neoliberal social formation, and finally one that has a historical reference point (Biblical Jubilees, declarations of debt forgiveness on ascension to the throne, etc., elaborately examined by David Graeber). Moreover, organizing and making propaganda around the question of debt is a crucial one for linking masses more broadly in the current struggle against capital in the wake of the crisis. As it involves not just poor workers, but also labor aristocrats, petty bourgeois, and even students and a substantial part of the middle class, it is a classic Popular Front formula and worth undertaking on that basis. However, it is important that the forms of organization not be allowed to fade into mere individualist resistance, liberal market-based solutions, and magical thinking, as is so often the case with inchoate and undertheorized populist approaches. The 99% cannot bail out the 99%, as both ‘bailouts’ and ‘the 99%’ are questionable strategic notions. For this reason, I am skeptical of the Rolling Jubilee.
I think what may be underappreciated in all this is that these debts that are being paid off for pennies on the dollar are actually held as assets on the balance sheets of institutions. I would not be surprised if these assets are booked at their Full value instead of a value that reflects their distressed nature or actual value. So if these assets are booked at their full value and then collaterized and levered up themselves, I think this could have the potential to do some serious damage to someones balance sheet. If the debt purchases were aimed at a specific institution that was over-leveraged in a particular debt class, it could have tremendous power to decapitalize the targets balance sheet.
one thing that the plan overlooks is that financial institutions could just change the rules completely if they wanted to, for instance lobby to outlaw the forgiveness of debt for an obscure technical reason and challenge the debtors relief fund with frivolous lawsuits to tie up its resources. that’s if the movement becomes successful to begin with which is a long shot. competing with financial institutions (or normal corporations) on a technical or legal basis is always dangerous because these techniques and laws only exist at the pleasure of the organizations whose purpose they serve, and can and have been either suspended, changed, or ignored completely when they no longer suit this purpose.
and beyond that, like you mention, not going after the source of debt (education used to be so cheap!) to start with concedes 99% of the territory to the enemy to begin with. who cares that someone owes money for something that could easily and should be free? challenge the creation of debt successfully and you get rid of the problem at its root.
Totally agree that if we start succeeding at all they’ll make it illegal. But that’s kind of the point. We get to show that they’re vindictive assholes, not practicing “economics” at all. Mainly, we get the whole issue on the table, because nobody’s talking about it. That’s what all this is really about. I mean, yes, the fact that we free people from millions in debt directly in the process is GREAT, but the larger effectiveness of the campaign is to delegitimate the system.
Yeah, comrade Konsko also mentioned this, and I’m certainly aware of the larger context of Strike Debt within which this operates. My critique rests on the fear that these kind of market-based, liberal interventions will lead the anti-debt movement into a trap, just as happened with some sections of Occupy for the same reason. I also have some wider thoughts about the significance of debt as a subject and its limitations, but that probably deserves dealing with separately.
“the larger effectiveness of the campaign is to delegitimate the system.”
Of the global population, I wonder what percentage needs to be convinced that the system is lacking legitimacy. The last year alone of continued economic stagnation, global uprisings/general strikes and “natural” disasters met by incompetent states continues to delegitimate the system just fine. What thinkers on the Left need to start providing are serious ideas for an alternative to capitalism (not party or leadership or a 10 pt programme), because TINA is what keeps social revolution in advanced countries a pipe-dream, not flimsy claims to legitimacy by the moribund bourgeoisie.