Just Debt

Theology, Ethics, and Neoliberalism

Ilsup Ahn

• Publisher: Baylor University Press
• Year: 2017
• Print ISBN: 9781481306928, 9781481306911
• eBook ISBN: 9781481307376
• Topic: Theology & Religion
• Subtopic: Economic Theory

Debt--personal, corporate, governmental--is so pervasive in contemporary economies, with its moralistic logic nearly unquestioned. Debt's necessity renders it morally neutral, absolving it of the dehumanizing effect it brings in unbridled financialization.
 
In  Just Debt Ilsup Ahn explores ethical implications of the practice of debt. By placing debt in the context of anthropology, philosophy, economics, and the ethical traditions provided by the Abrahamic religions, Ahn holds that debt was originally a form of gift, a gift that was intended as a means to serve humanity. Debt, as gift, had moral ends. Since the late eighteenth century, however, debt has been reduced to an amoral economic tool, one separated from its social and political context. Ahn recovers an ethics of debt and its moral economy by rediscovering debt's forgotten aspect--that all debts entail unique human stories. Ahn argues that it is only in and by these stories that the justice of debt can be determined. In order for debt to be justly established, its story should be free from elements of exploitation, abuse, and manipulation and should conform to the principles of  serviceability, payability, and  shareability.
 
Although the contemporary global economy disconnects debt from its context, Ahn argues that debt must be firmly grounded in the world of moral values, social solidarity, and political resolution. By re-embedding debt within its moral world,  Just Debt offers a holistic ethics of debt for a neoliberal age.

Chapter One

The History and Taxonomy of Amoral Debt

Introduction

Can we imagine a society where there is no debt? Since no one seems to want to be in debt, if we could create a society without debtors, this society would be a lot closer to an ideal one than ours, where all seem to be debtors except for a few lucky ones. We may call this society a debtless society. What is it like to live in this society where no one is in debt? Would a debtless society be a utopia or the kingdom of God? To my knowledge, however, no Western thinkers have yet identified an ideal society as a debtless society, including Karl Marx (1818–1883). Although Western political thinkers have seldom thematized the concept of a debtless society as a viable political vision or goal, Thomas Hobbes (1588–1679) offers us a glimpse of what this society would be like in his book Leviathan (1651). It was not his original intention, though, to provide us with a brief but quintessential description of what a debtless society would be like; it was more likely an inadvertent by-product of his philosophical imagination.

Hobbes depicts the society where there is no debt as the state of nature. In the state of nature, men (Hobbes’ language) are naturally equal in capacities of mind and body so that even the weakest has enough strength to kill the strongest, “either by secret machination, or by confederacy with others.”1 The state of nature is marked by its lack of a common political power or a governing authority, which effectively leads all its inhabitants to a warlike situation, which he calls “war of every man against every man.”2 The state of nature is further characterized by the total absence of the notions of right and wrong, justice and injustice. According to Hobbes, “Where there is no common Power, there is no Law: where no Law, no Injustice.”3 In the state of nature, force and fraud, the “two cardinal virtues” of war, are prevalent, and its inhabitants are constantly exposed to and motivated by perpetual fear and strife, fed by three psychological causes: competition, diffidence, and glory.4 In such a condition of war of one against another, Hobbes holds, there is no place for industry, agriculture, navigation, trade; there are no arts, no letters, no civil society, no amenities of civilized living; and, worst of all, there is “continual fear and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.”5 I would like to add one crucial item to this “no” list—debt. There is no debt in the state of nature, and thus no one is a debtor to anyone else in this state. Contrary to our initial expectation, according to Hobbes, a debtless society is conceptually illustrated as a violent, unjust, and inhumane society. This society where no one is a debtor to anyone else appears to be far from being a utopia or the kingdom of God.

The absence of attention to debt in the development of the Western political philosophies since the dawn of the Enlightenment and European colonialism is philosophically culminated with the publication of John Rawls’ A Theory of Justice in 1971. In this hugely influential book, Rawls lays out a conceptual mechanism through which he develops a definitive principle of justice known as “justice as fairness.” Drawing on the philosophical insights of the Enlightenment thinkers’ social contract theory (Locke, Rousseau, and Kant6), he devises a hypothetical situation, known as the “original position,” in which a universal principle of justice is hammered out as a result of free individuals’ fair and mutual agreement under impartial conditions. He argues that this impartial condition is conceptually possible thanks to the “veil of ignorance.” The veil of ignorance is a methodological device that enables all participants of the original position to think from everyone’s perspective. According to Rawls, the veil of ignorance makes possible a unanimous agreement on choosing a particular concept of justice by effectively screening individuals’ particular aspects, such as their abilities, tastes, positions, and backgrounds, including race, gender, and class. Since these particular aspects would no longer affect the individuals in the original position while they are choosing the principle of justice, it seems evident that the chosen principle of justice will be free from any particular contingencies and thus universal. He also adds that each participant of the original position is not only rational, in the sense of trying best to advance his or her interests in choosing among principles, but also moral, since the idea of a game does not apply here, as each party is not concerned with winning but with getting as many points as possible judged by his or her own system of ends.7

Despite the creative methodological breakthrough he develops to uncover the principle of justice from a liberal political tradition, Rawls’ original position, like Hobbes’ state of nature, is conceived as an ideal type of a debtless society. There is neither a debtor nor an indebted relation in Rawls’ original position because the status of a debtor itself is a particular condition to be screened. Of course, one can put himself or herself hypothetically in a debtor’s position while he or she is deliberating in the original position, but he or she does so as an impartial individual participant separated from a specific social and structural context of debt. As a result, the principle of justice developed in that hypothetical situation would be only partially conducive to the development of an ethics of debt, or simply inadequate to become a full-fledged ethics of debt due to the lack of a full consideration of social and structural aspects of debt. Since Rawls argues that his theory of justice minds the “basic structure of society,” his lack of concern with the problem of debt insinuates that Rawls does not regard debt as one of the key social and structural issues for liberal societies such as the United States and many European countries. Intended or not, the problem of debt has been traditionally marginalized in Western liberal political philosophies and social theories of justice, resulting in the subsequent marginalization of debtors in the structural hierarchy of liberal society.

The first step toward the construction of an ethics of debt is now more than clear. What we need is not only to reconceptualize the problem of debt as a basic social-structural issue in liberal political society but also to demarginalize debtors in the structural hierarchies of both local and global society. As mentioned above, the goal of the philosophical endeavor of developing an ethics of debt should not be about constructing a debtless society. A debtless society can exist only in an imaginative world, and no ethics seems possible where there is no debt; but debt itself is not the source of ethics.

Deconstructing the Reductive Appropriation of Debt

In order to reconceptualize the problem of debt as a basic social-structural issue in liberal political society, we should first demystify debt. Debt has been historically mystified in many different forms by a number of people including philosophers, theologians, politicians, and economists. Among those, two forms are particularly conspicuous: reducing debt to an amoral issue and hyperbolizing debt through its moralization. I focus on the former in this section, the latter in the following one. The reduction of debt to an amoral issue is enabled when the problem of debt is separated from its historical, cultural, political, or structural context. When debt is entirely decontextualized from its complex context, then no matter what happens to debtors and creditors or between themselves, debt simply becomes a matter of individual responsibility to repay. The moral character of an individual debtor is no longer defined by who he or she is but rather by whether the debtor pays back his or her debt along with the interest in due time. In that decontextualized situation, a debtor is always potentially inferior to his or her creditor in moral character, and if a situation occurs in which a debt is unpaid, the blame always lies in the debtor rather than in the creditor. In that decontextualized situation, there is no chance for a debtor to be recognized as a victim; a debtor is always a potential culprit or defendant, not a potential victim. The potential victim is always the creditor.

In such a decontextualized situation, debt is commonly totalized by economic or business terms, and the moral aspect of the debtor-creditor relation is largely subsumed by legal codes. In that situation, an ethics of debt is significantly reduced or minimized to a level of individual responsibility of debtors. Ethics is largely privatized in this situation. Before attempting to demystify debt, then, we should first investigate how the problem of debt has been reduced to an amoral status. To do this, we need to rely on social-scientific research and its results. North American anthropologist David Graeber argues in his recent book, Debt: The First 5,000 Years, that to develop an ethics of debt we should first look at the real history of debt and review the “forgotten debates about debt” instead of trying to approach it from a certain predetermined or privileged vantage point such as the neoliberal economist point of view.

Graeber first points out that the problem of debt has been a major social-structural issue in human history, and the history of debt tells us that it has been an essential factor in defining humanity’s moral and religious ethos:

For thousands of years, the struggle between rich and poor has largely taken the form of conflicts between creditors and debtors—of arguments about the rights and wrongs of interest payments, debt peonage, amnesty, repossession, restitution, the sequestering of sheep, the seizing of vineyards, and the selling of debtors’ children into slavery. . . . Terms like “reckoning” or “redemption” are only the most obvious, since they’re taken directly from the language of ancient finance. In a larger sense, the same can be said of “guilt,” “freedom,” “forgiveness,” and even “sin.”8

He then moves on to deconstruct one of the key conventional economic doctrines, that money was originally invented to replace the inconvenient barter system, relieving ancient people from having to bring their goods to market. Graeber’s argument is worth laying out in detail because he effectively demystifies the “great founding myth of the discipline of economics.”9 Graeber begins his argument by pointing out that economists always develop the story of money with a fantasy world of barter.10 According to Graeber, this economic myth goes back to Adam Smith, who was deeply influenced by the liberal tradition of philosophers such as John Locke, for whom the main goal of government is to protect citizens’ private property. Like Locke, Smith believed that property, money, and markets existed before a political government was established as the foundation of human society. According to Smith, when the division of human labor was thoroughly established at the dawn of human civilization, ancient people began to engage in lives of exchanging: “Every man thus lives by exchanging or becomes in some measure a merchant, and the society itself grows to be what is properly a commercial society.”11

As more people engaged in the exchange of commodities, the need of currency arose, and different commodities such as salt were employed for this purpose. Eventually, precious metals were widely accepted as currency because of traits such as durability and portability. As Smith writes, “It is in this manner that money has become in all civilized nations the universal instrument of commerce, by the intervention of which goods of all kinds are bought and sold, or exchanged for one another.”12 The creation of money boosted the efficiency of the market economy, entailing its further growth. In book 4, chapter 2 of his Wealth of Nations, Smith lays out the key tenet of classical liberal market economies by emphasizing the market’s capacity to sustain itself and flourish based on its own mechanism, called the “invisible hand.” It is worth quoting this rather long passage:

As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.13

Given that the market system is working best on its own operative principle, the role of government is largely limited to the protection of the market system rather than its regulation. According to Graeber, the logical consequence of this argument is that government should limit itself to guaranteeing the soundness of the currency, if government should play any role in monetary affairs. Moreover, by making such an argument, Smith could insist that “economics is itself a field of human inquiry with its own principles and laws—that is, as distinct from, say ethics or politics.”14 The result of the distinction between economics and ethics or politics is the gradual reduction of debt to an amoral status through the separation of debt from its social, political, and historical context. Indeed, “economics is then endowed with laws of its own, de-contextualized, de-historicized, and dissocialized.”15 As economist Gavin Kennedy argues, modern economists, especially those influenced by the Chicago school of economics, have played a key role in fortifying the separation between economics and ethics or politics in the name of neoliberalism. These economists have successfully transformed Smith’s metaphor into a neoliberal myth.16

How does Graeber attempt to demystify debt? In other words, how does he attempt to deconstruct the neoliberal economists’ decontextualizing, dehistoricizing, and dissocializing reduction of debt to an amoral status? He launches his grand project by asking a fundamental question as an anthropologist: What really happened at the beginning of human society? Graeber writes:

In fact, our standard account of monetary history is precisely backwards. We did not begin with barter, discover money, and then eventually develop credit system. It happened precisely the other way around. What we now call virtual money came first. Coins came much later, and their use spread only unevenly, never completely replacing credit systems. Barter, in turn, appears to be largely a kind of accidental byproduct of the use of coinage or paper money: historically, it has mainly been what people who are used to cash transactions do when for one reason or another they have no access to currency.17

In an interview in the Green European Journal, Graeber emphasizes that debt historically preceded money. Debt existed before money, which was created for various governmental purposes such as the need for war or criminal justice. It seems clear that the genealogical origin of money is not strictly confined to economic necessity. “Money isn’t borne out of economic necessity stricto sensu, but rather from state or proto-state needs.”18 What is the moral significance of Graeber’s provocative statement that debt exists before the creation of money and the genealogical origin of money is not necessarily economic?

First, although debt is commonly monetized based on the economic logic of exchange and reciprocity, debt is fundamentally a problem of human arrangement, not something wholly governed by the general (economists would rather use “scientific”) economi...

Table of contents

• Cover
• Title Page
• Copyright Page
• Dedication
• Contents
• Acknowledgments
• Introduction
• 1. The History and Taxonomy of Amoral Debt
• 2. Neoliberal Financialization and the Idea of Just Debt
• 3. Unpayable Debt and the Ethics of Default and Bankruptcy
• 4. Islamic Financial Ethics and the Case against Rentier Economy of Debt
• 5. Jewish Ethics of Jubilee and the Question of Debt Forgiveness
• 6. Christianity and a Virtue Ethics of Debt
• Conclusion
• Notes
• Bibliography
• Author Index
• Subject Index