Debtfare States and the Poverty Industry

Money, Discipline and the Surplus Population

Susanne Soederberg

• Publisher: Routledge
• Year: 2014
• eBook ISBN: 9781317646723
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: International Relations
• Index: Politics & International Relations

WINNER of the BISA IPEG Book Prize 2015

http://www.bisa-ipeg.org/ipeg-book-prize-2015-winner-announced/

Under the rubric of 'financial inclusion', lending to the poor –in both the global North and global South –has become a highly lucrative and rapidly expanding industry since the 1990s. A key inquiry of this book is what is 'the financial' in which the poor are asked to join. Instead of embracing the mainstream position that financial inclusion is a natural, inevitable and mutually beneficial arrangement, Debtfare States and the Poverty Industry suggests that the structural violence inherent to neoliberalism and credit-led accumulation have created and normalized a reality in which the working poor can no longer afford to live without expensive credit.

The book further transcends economic treatments of credit and debt by revealing how the poverty industry is extricably linked to the social power of money, the paradoxes in credit-led accumulation, and 'debtfarism'. The latter refers to rhetorical and regulatory forms of governance that mediate and facilitate the expansion of the poverty industry and the reliance of the poor on credit to augment/replace their wages. Through a historically grounded analysis, the author examines various dimensions of the poverty industry ranging from the credit card, payday loan, and student loan industries in the United States to micro-lending and low-income housing finance industries in Mexico.

Providing a much-needed theorization of the politics of debt, Debtfare States and the Poverty Industry has wider implications of the increasing dependence of the poor on consumer credit across the globe, this book will be of very strong interest to students and scholars of Global Political Economy, Finance, Development Studies, Geography, Law, History, and Sociology.

The Open Access version of this book, available at http://www.taylorfrancis.com/books/e/9781315761954, has been made available under a Creative Commons Attribution-Non Commercial-No Derivatives 4.0 license.

https://www.youtube.com/watch?v=2lU6PHjyOzU

PART I

Theorising money, credit and debtfare states

1

DEMYSTIFYING MONEY

The main objective here is to demystify money from a Marxian perspective, or, what is the same thing, a historical materialist approach. The central argument of this chapter is that money can be viewed as a social relation of power only if it is contextualised within the wider dynamics of capital accumulation. To this end, I have organised the chapter into four main sections. Section One sets out to distinguish between economism (or economic determinism) – with which Marxian theory is conventionally but incorrectly charged – and a historical materialist method of deconstruction. This discussion provides the platform for Section Two, which is aimed at demystifying money as an economic category or thing by drawing on the tools of historical materialism. Section Three elaborates on how inequality and exploitation become distorted in the illusions of equality, freedom and democracy that define capitalist society, or what Marx (2005) refers to as the community of money. Section Four summarises the argument and provides concluding remarks.

Economism versus historical materialism

We begin our analysis of money with the first charge made by Leyshon and Thrift (1997) regarding the Marxian tendency toward economism. Readers will recall from the introductory chapter that economism refers to the reduction of all social and cultural dimensions of life to the economy. Many authors have levied a similar charge against Marx and Marxian approaches in order to hurriedly discredit the vastly complex and rich theory of historical materialism. For many non-Marxian scholars, the corrective to this alleged weakness in Marx has been to accept the standard economic understanding of money and credit, while animating it with social relations and moving away from charges of economism by emphasising the primacy of the social and cultural dimensions of finance.

I maintain, however, that Leyshon and Thrift’s first critique is based on a fundamental misreading of Marx. This charge, upon which the rest of the four criticisms are based, rests on a problematic reading of Capital (and David Harvey’s work, in turn) as an economic text rather than as a materialist critique of classical political economy (Clarke, 1991; Holloway and Picciotto, 1991). As such, Leyshon and Thrift conflate economism with materialism. The difference between the two starting analytical points is not only significant for the study of money and its role in the social relations of debt, but also impedes our ability to break with the world of appearances at the beginning of our analysis (Clarke, 1978).

For Marx, it is important to deconstruct the appearances or illusions of capitalist society, or what he refers to as ‘fetishism’. We discuss this term in more detail below. Suffice it to say here that fetishised appearances of money and credit as natural objects, while quite real to all of us, are important for Marx because they hide the relations of domination and exploitation that characterise capitalism. As we will see, Marx deconstructs economic categories such as the commodity and money, for instance, to reveal their inner social content. It is, therefore, imprecise to charge Marx with economism.

For Marx, materialism describes the way societies fulfil their wants and needs.¹ Or, as Harvey (1989: 8) plainly states: ‘We need to eat in order to live, think, argue, raise children, fight, enjoy ourselves,’ and so on. The manner in which all societies throughout history have accomplished this is based on its mode of production. The way in which the capitalist mode of production is organised masks social relations of power. This veil or disguise is what Marx refers to as fetishism. It is important to stress that while fetishism has different meanings in other academic traditions, it takes on a specific sense in Marx’s work (Harvey, 1999, 2010a and b; Marx, 2005).

Fetishism is an illusion that is constructed, yet also real. As Marx suggests in his historical materialist method, because fetishism is a social construction, it can also be dismantled. David Harvey’s classic example of fetishism in capitalism is enduring and reveals, once again, why his method of historical materialism is a corrective to economism rather than an extension of it. Harvey begins by asking readers to trace back where their dinner came from in order to become aware of the many people involved in even the simplest of meals. Despite the presence of these people, we consume our meals without knowing anything about them. We know nothing of the conditions of their lives and labour, their joys, discontents and aspirations – all of which remain concealed from us and subordinated to the prices we pay for commodities. For Harvey (1989: 8), ‘this masking arises because our social relations with those who contribute to our daily sustenance are hidden behind the exchange of things in the market place’. Marx’s objective in Capital and his materialist method is to demystify the fetishism of commodities in the market and to build a theory of how commodities are produced, traded and consumed in order to comprehend the technical conditions and social relations that put food on the table. Money, of course, is central to commodity fetishism and therefore the critique of money is intrinsic to the critique of the fetishised relationships that underscore capitalism (Marx, 1990, 2005).

Marx’s method is not intrinsically economistic in nature: it does not seek to understand the capitalist mode of production as an economic realm divorced from social considerations. Marxian theory is concerned with understanding how a particular type of social relation gives rise to the power of things over people. As such, it seeks to demystify capitalist society as a naturally occurring and harmonious set of market relations and reveal it as a mode of production marked by silent compulsions and unequal and exploitative relations. Marx devised his historical materialist method to expose and deconstruct economistic representations of capitalist markets as the embodiment of natural harmony in which buyers and sellers voluntarily meet to exchange goods and services. In doing so, Marx sought to reveal that perfectly functioning markets and the invisible hand of rational, competitive and self-interested individuals would not produce an outcome beneficial to all, but would instead make the capital class incredibly wealthy while relatively impoverishing the workers and everyone else (Harvey, 1999; 2010a; Marx, 1990, 2005).

If we fail to employ a historical materialist approach to our investigation of debt, we are left with an economist’s view of money and credit in capitalist society – upon which we can construct only complementary, fetishised understandings. What is lost, both analytically and politically, is the ability to understand how and why the social power of money continues (with assistance from states) to promote the illusion of the equality of exchange. This is critical given the extent to which the neoliberal era is marked by privately created money generated by capitalists and extended at very high rates of interest to the surplus population.

Demystifying money

Following Marx, this section will reveal that it is impossible to demystify money as an economic category and thus grasp its social power, by remaining exclusively in the sphere of exchange, i.e., the realm in which consumer credit is largely studied in the financialisation and consumer credit literature. For Marx, the primary reason for this is that one cannot break through the money fetish in the realm of exchange because this sphere operates on the fetishised principle of equivalence. This latter principle, upon which the price system rests, implies that ‘the circulation of commodities requires the exchange of equivalents’ (Marx, 1990: 160, quoted in Harvey, 1999). For Marx (1990: 168–9), the power of the money fetish in the realm of exchange is its ability to conceal ‘the social character of private labour and the social relations between individual workers, by making those relations appear as relations between material objects, instead of revealing them plainly’. Seen from this angle, the power of money dissolves previous social ties and dependencies evident in pre-capitalist communities by becoming the real community (Marx, 2005: 224–5). The community of money, moreover, is characterised ‘by individualism and certain conceptions of liberty, freedom and equality backed by laws of private property, rights to appropriation and freedom of contract’ (Marx, 2005; Harvey, 1989: 168). It is therefore difficult to grasp the social power of money by beginning with the sphere of exchange.

Marx (1990) begins his demystification of money by identifying a basic assumption that was taken for granted by political economists of his time: Why does one commodity (money) operate as an impartial numéraire, so that the relative values of all other commodities can be unequivocally expressed as a price? By interrogating these observations, Marx is interested in revealing how and why capitalist social relations are constructed (and reconstructed). As Harvey suggests, ‘money is not established arbitrarily or out of mere convention. The money commodity is produced in the course of history by a specific social process – participation in acts of exchange’ (Harvey, 1999: 10).

The revolutionary power of money lies in the fact that, as a commodity, it becomes the direct incarnation of all human labour. In capitalism, Marx notes that people

relate to each other in their social process of production in a purely atomistic way. Their own relations of production therefore assume a material shape that is independent of their control and their conscious individual action. This situation is evident by the fact that the products of human labour universally take on the form of commodities. The riddle of the money fetish is therefore the riddle of the commodity fetish.

(Marx, 1990: 187; see also Mandel, 1968; de Brunhoff, 1976)

For Marx, the key to solving this puzzle is not to grasp that ‘money is a commodity’, but rather to discover ‘how, why and by what means a commodity becomes money’ (Marx, 1990: 183). To tackle this conundrum, Marx urges us to go beyond the sphere of exchange – characterised by illusions of individuality, equality and freedom – in order to understand its connection to the sphere of production, where class relations of inequality become apparent (Marx, 1990). In contrast with other treatments to money in capitalism (Zelizer, 1997; Simmel, 2004; Ingham, 2004), Marx begins his analysis by exploring the circulation of capital (as opposed to money) and the class relations implied therein, which is implied in Marx’s inquiry into how a commodity becomes money (Harvey, 1989). This analytical move reveals, as Harvey suggests (1989: 169), ‘a deep tension between the individual and equality that the possession of money implies and the class relations experienced in the making of that money’. Marx sought to break through the fetishism of money by developing a labour theory of value. It is to an outline of this theory that we now turn our attention.

Labour theory of value

To understand how a commodity becomes money, Marx identifies three types of value inherent in all commodities: use-value, exchange-value and value (Marx, 1990). Use-value describes the usefulness of a commodity. Without someone needing or wanting a particular commodity (social validity), it cannot enter into the exchange process. The exchange-value, as noted above, is allegedly based on the principal of equivalents. The exchange-value of a commodity is not inherent to it, e.g., a pacific salmon does not swim around with a price on its tail any more than a coffee bean emerges with a price on its husk. As such, the exchange-value (represented by prices) of our salmon or coffee bean implies that a commodity is exchangeable for something else and that something else is revealed only when the commodity is exchanged. An exchange-value must therefore be commensurable to something and reducible to a third thing. For Marx, this commensurability is not found in use-value, but instead in the fact that all commodities are products of human labour. Up to this point, Marx’s argument parallels classical political economist, David Ricardo (Itoh and Lapavitsas, 1999).

According to Ricardo, the exchange-value of a commodity (price) is determined by the actual labour time involved in producing the commodity. Marx departs from Ricardo’s theory of value on the basis that the type of human labour that is embodied in commodities cannot represent the actual time taken to produce the commodity, as the longer it takes to produce a commodity, the more valuable it would be. For instance, why would you pay more for salmon that took a fisherman longer to catch, when you could get the same fish at half the price from a more efficient and/or skilled fisherman? Indeed, if time were the true measurement of exchange-value, commodities produced by unskilful or lazy workers would therefore be more valuable than other commodities.

To overcome this problem – and thereby distinguish his approach from those of the classical liberal political economists of his time – Marx added to the concept of concrete labour a second type of human labour present in all commodities: abstract labour. Unlike the heterogeneous nature of concrete labour (e.g., tailoring, spinning and weaving), abstract labour captures the homogenous aspects of human labour that forms the value of commodities (Marx, 1990: 137). Put another way, the commonality of all different forms of concrete labour is human labour in general. To anticipate the narrative somewhat, it is important to note that Marx uses the distinction between concrete and abstract labour to understand grasp how the appearance of commodities as things posses value. Marx (1990: 142), for instance, stresses that abstract human labour creates value but is not itself value. Abstract labour becomes value in its coagulated state, in objective form (money). ‘The value of the linen as a congealed mass of human labour can be expressed only as an “objectivity” […], a thing which is materially different from the linen itself and yet common to the linen and all other commodities’.

It follows from the above discussion that Marx’s understanding of value and its measurement, is defined by abstract human labour, which he refers to as socially necessary labour time. Socially necessary labour time refers to ‘the labour-time required to produce any use-value under the conditions of production normal for a given society and with the average degree of skill and intensity of labour prevalent in that society’ (Marx, 1990: 129). Socially necessary labour time is determined by a wide range of circumstances such as the workers’ average degree of skill, science and its technological application and so forth (Marx, 1990). Socially necessary labour time is, therefore, highly dynamic as well as spatially and temporally specific; definitions of what is ‘normal’ and ‘average’ are also, socially constructed by relations of power in capitalist mode of production (Harvey, 1999).

Marx’s construction of value is vital to understanding what is necessarily concealed by money in its role in exchange-values under capitalism and thereby debunk its natural state, which is, of course, implied when theorists ‘just assume’ money. Although value is immaterial (abstract), it is objective (or, concrete). As Harvey explains, value is a social relation, which you cannot actually see, touch, or feel directly. Yet, this value has an objective presence in that it is represented by money as a measure of value. Money is, therefore, not simply a commodity, but also a symbol or tangible, quantitative expression of value (socially necessary labour time) embodied in price. This monetary representation in the form of prices ‘makes value (socially necessary labour time) the regulator of exchange relations. On this view, prices, which are the quantitative expression of exchange-value, are ‘the money-name of the labour objectified in a commodity’ (Marx, 1990: 195). ‘Since money does not reveal what has been transformed into it, everything, commodity or not, is convertible into money. Everything becomes saleable and purchasable’ – this ability to hang a price tag on everything and everyone on the planet is a defining feature of the commodification process (Marx, 1990: 229).

Value as socially necessary labour time and its quantitative expression in monetary terms (i.e., prices), is historically specific to the capitalist mode of production. Extracting value from workers is not a natural state of affairs, however. As we will see in the rest of the book, value as socially necessary labour time must instead be reproduced thro...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of illustrations
• Acknowledgements
• List of Abbreviations
• Introduction
• Part 1 Theorising money, credit and debtfare states
• Part 2 Debtfarism and the poverty industry in the United States
• Part 3 Debtfarism and the poverty industry in Mexico
• Conclusion
• Bibliography
• Index