A New Lost Generation: Student Loans, Wage Slavery, and Debt Peonage


Dr. Nicholas Partyka I Labor Issues I Analysis I July 24th, 2015



Dislocation; Or, On the Experience of Being Lost

In literature, the term "lost generation" refers to a cohort of authors whose work defines the post-First World War era. This group includes literary notables like Ernest Hemingway and F. Scott Fitzgerald, among others. According to the dominant understanding, what made this group of expatriate writers, centered in Paris, 'lost' was not a sense of geographic dislocation, but rather one of spiritual or moral dislocation. Their experiences in or with the war led them to question, even to abandon, the systems of values that they had held prior to the war. This kind of sentiment, and experience, was not uncommon in society at large. This is likely part of why these authors' work achieved such prominence in this period. Many people felt lost in this era, even before the onset of the Great Depression.

The project of liberalism had been brought into serious question by the First World War. According to liberals, as society embraces the philosophical tenets, the economic and political institutions, the social and economic practices, as well as political values of liberalism, greater social peace and stability would arise. This would occur both nationally, as society came more and more to resemble the liberal ideal, and internationally, as liberal states cooperated and traded rather than fought with each other. Up to the time of the First World War liberals retained their faith in the idea, rooted in the Enlightenment, of 'Progress'. The reality of the war shattered these comforting illusions. Indeed, since the Napoleonic defeat, with some exceptions largely in their colonial possessions, liberal states had not gone to war with each other. This made it easy for some, based on an argument from Kant, to believe in an idea like the liberal, or democratic, peace.

Being 'lost' in this fashion was to experience a form of social disorientation resulting from a sense of, what Durkheim called, anomie. Having lost the easy faith in liberalism, many in this generation found themselves without the traditional moral framework, or social guidelines around which most people construct their lives, and their life trajectories. The fact that war occurred; that the introduction of modern industrial technology on an unprecedented scale caused such unfathomable carnage; that modern communications technology was advanced enough for the people on the home front to see, and to understand the reality of the war; the ever increasing heights of wealth and opulence enjoyed alongside crushing poverty; the continuing rapid pace of industrial and technological, as well as social change. All these contributed to the feeling of anomie, and even ennui, that made so many in this generation feel 'lost', or disoriented.

The term "lost generation" also has a usage in political-economy. There are some interesting similarities in the experience of being 'lost', of social disorientation, between the two different usages here. In political-economy, the notion of a 'lost generation' refers to a cohort of workers adversely impacted by a persistently weak labor market. A generation of workers can be lost to the impact of poor macro-economic conditions in several ways. From the point of view of society, this generations' labor is lost, and the material progress of society delayed, in that it is never deployed in its most productive use, or at its full potential. This generation, and the next, can be lost in that their progress on the ladder of social mobility, assuming that such a thing existed, can be slowed by the practical limitations imposed by economic constraints. Most mainstream capitalist economists understand the notion of a "lost generation" as a cohort of workers whose lifetime earnings are likely to be less than they otherwise would have likely been, due to the poor performance of the macro-economy.

A lost generation is a serious matter, because it will have a significant, widespread, and multifaceted impact on society. A potential lost generation will impact not only the individual workers, but also their families and their communities. Workers who make less are not able to invest in important resources and opportunities for themselves, and for their families, especially their children. The diminished capacity of the majority of workers to invest in the personal development of themselves, and importantly, of their children, will have important consequences for the health of workers' democracy. In a heavily stratified form of society, such as capitalism, the effects of a potential lost generation will be different in specific segments of the labor market, and income spectrum. Those higher up may be able to avoid to worst of the negative effects of the kind of poor economic climate that produces a lost generation. Those lower down may end up being crushed under the weight of the forces causing the disruption. Suicide, lack of adequate medical attention, lack of adequate housing, lack of sufficient food, all take the lives of people forced onto the margins of a commercial, capitalist society. Workers are also 'lost' in these latter ways during periods of economic turbulence and distress.

It is the specter of exactly such a lost generation of students and workers that haunts many economies in the Euro-Atlantic world, especially including the US. The dominance of neo-liberal austerity policies only further exacerbates this problem of a potential lost generation. As social programs are increasingly defunded, or even privatized, workers and the poor face increasing pressure to make ends meet, that is, to obtain basic subsistence goods. And when crisis is combined with austerity these pressures only multiply, causing many on the margins to crack under the pressure. The neo-liberal response to the crisis in the US, and even the job-less recovery, further increased these pressures on the most vulnerable, which has caused widespread social dislocation in many countries. Though every country has a unique experience, some of the main symptoms are the same; higher unemployment and underemployment, especially among youth; increases in the ranks of the long-term unemployed; increases in homelessness; increases in suicides; increases in premature deaths due to inadequate medical care, shelter, and nutrition; increases in drug and alcohol abuse. The social dislocation resulting from the fallout of the 2008 global financial crisis, and its aftermath, has so disrupted the pre-crisis status quo that many, especially young people, increasingly feel a kind of anomie, like that which animated the literary Lost Generation of the 1920s.


Austerity & Social Dislocation in Greece

To see what a lost generation can look like, and what its social consequences can be, Greece offers a striking case study. Since the 2008 global financial crisis, and the Euro crisis which followed, Greece has been at the center of the action. Indeed, it was exposure to Greek debt which was, and still is, the major fault-line of the Eurozone crisis. In order to save the Eurozone, creditor nations, and international financial institutions, have intervened on more than one occasion to provide Greece with "bailouts" and rescue loans to prevent a default on their debt; which many fear would trigger a collapse of the entire Eurozone. The unrelenting austerity measures imposed on Greece since 2010 have taken a massive toll on the Greek population. As the drama of the negations between the new SYRIZA-led Greek government and its creditors unfolds, it continues to be the Greek people, especially the most vulnerable, who bear the costs of neo-liberal prescribed austerity policies.

Right now, Greece is in the process of being the victim of what gangsters of another era would call a "shake-down". That is ultimately what the negotiations with its creditors are. And, in light of how the creditors have acted toward Greece, this appearance has hardly been dispelled . Those to whom the Greeks owe money are insisting on full repayment, and have a clear policy agenda for how to get it, and have thus far steadfastly refused to engage in any discussion of a pro-growth policy programme. Greece is begin held-up by European financial elites by using access to credit and bond markets -indispensible tools for all modern governments- to coerce Greece into compliance. Being cut-off from these markets would make it harder for Greek businesses to do business with the rest of the world, it would also hamper the efforts of the Greek government to achieve its political and economic objectives. In order to pay back what they owe, creditors are and have been demanding the Greeks "privatize", i.e. sell to the highest bidder, state assets, raise more tax revenue, and spend less on social programs. This is the general policy prescription the troika has consistently applied to Greece. The international creditors, just like Shakespeare's famous Shylock, are in essence demanding their pound of flesh from Greece.

The affects of these policies has been utterly devastating on Greek society. By 2012, the enormous scale of the economic and social crisis brought on by neo-liberal austerity policies was abundantly clear. The main results of austerity for Greek workers and families have been; around 25% unemployment, and the rate for youth under twenty-four is double the overall rate; near 20% decline in wages across the board; about 30% of the population living below the poverty line, and have no access to affordable healthcare; the average family income in Greece has fallen back to its 2003 level; 40% of Greek children are growing up below the poverty line; 45% of Greek pensioners living below the poverty line; 58% of the unemployed live below the 2009 poverty line; a 25% increase in homelessness just between 2009 and 2011; a dramatic rise in personal bankruptcy filings. Meanwhile the tax increases, as well as wage and pension cuts, in addition to cuts to social services, demanded by the troika have resulted, according to one study, in the poorest households in Greece losing 86% of their pre-crisis income. The wealthiest by contrast have lost an estimated 20%, and this is at the upper end of estimates.

Steep declines in wages, deep cuts to social services, rises in unemployment, and tax increases, have all combined to put brutal pressure on 3 million Greeks living on or close to the edges of subsistence. The tumult created by the economic fallout of the austerity agenda imposed on Greece has resulted in a humanitarian crisis of immense scale. As Greece has been forced to spend less on hospitals, for example, the social effects have been dire . Greece has seen rises in infant mortality, a return of malaria, rising rates of HIV among drug users, limited access to important pharmaceuticals, and a dramatic spike in suicides and incidents of major depression. These are the results of Greece now spending less on healthcare than any pre- 2004 EU member state. With the severe wage and pension cuts, food insecurity has also exploded, as nearly three million Greeks do not have enough food to eat.

One of the major trends to emerge from this social catastrophe is the large-scale emigration of Greek youth. Given the unemployment picture, the continued recession, the deterioration or privatization of social welfare programs, many young Greeks see no option but to leave their home country to seek work abroad. This unfortunate trend is leading to what some call a "brain drain" effect as the most educated, the most talented young Greeks leave the country, thus depriving the nation of the type of talent necessary to lift it out of its economic malaise. This growing Greek austerity-fueled diaspora, lack of investment in social programs like health and education, increasing poverty and desperation, all combine to produce the conditions for a lost generation. After more than a half-decade of recession and austerity, the costs of the Eurozone crisis have been largely foisted upon the Greek people, and especially the most vulnerable among them.

The continued imposition of economic austerity policies on Greece will only produce more of what we have already seen, it will only deepen the social and humanitarian crisis in Greece. This brain-drain from a large-scale emigration of Greek youth would only compound Greece's financial problems, as it shifts the composition of the population, skewing it much older. This youth diaspora issue is a problem that Cuba, for example, is now confronting, as the economic effects of the US blockade continue to fuel the emigration of young Cubans for employment opportunities. Austerity and recession are choking the life out of the Greek economy, and the Greek people, just as the US blockade is meant to do to Cuba. Austerity is a political choice, it is a policy programme, and it is thus that a lost generation is being imposed on Greeks by the creditors, by the troika.

The other major trend to emerge from the crisis is a flourishing of truly grass-roots solidarity movements and projects. Soup-kitchens, free schools, and clinics, among other social-welfare and relief-oriented initiatives, have proliferated in Greece as communities and activist groups- especially anarchists- organizes themselves to help provide for those being deprived, those being starved, so that European banks and other creditors can be repaid on the terms they demand. This amazing social solidarity response is an optimistic sign of a flourishing anti-austerity, anti-neoliberal, anti-capitalist resistance movement in Greece. Indeed, the many protest marches, strikes, and occupations of public spaces and buildings shows this movement is very healthy, and has widespread support. The repeated and deep wage and pension cuts, the draconian cuts to social programs, the continued recession, and the loss of labor rights and even collective bargaining rights have severely affected so many people in Greece that radical (from the point of view of mainstream capitalist political parties) SYRIZA party won snap-elections earlier this year.

Despite the July 5th referendum, Greece's situation remained highly precarious. By returning a decisive victory for the anti-austerity "no" option, the Greeks not only displayed their pride and independence, but also gave some indication of the depth and breadth of the anti-austerity, and anti-troika sentiment in Greece. On the other hand, the results of the referendum have seemed to have embolden the creditors, and indeed, they appeared to dig in their heels even before the ballots were cast; that is, if one is to judge from the public pronouncements in the days preceding the referendum. The situation in Greece is dire, and deteriorating. As financial panic and bank runs became more intense, they compounded Greece's already significant social woes. It appears that fears of a much worse social and economic crisis, should Greece exit the Eurozone and re-institute the Drachma, are what led Prime Minister Tsipras and his government to capitulate to the creditor's demands. And also what led him to accept a new bailout agreement, with even more draconian austerity conditions than the agreement the Greeks ostensibly rejected in the July 5th referendum. The creditors decided they were prepared to financially strangle Greece, and allow its banks to collapse, if their terms were not accepted. In essence, the Greek government was forced to choose between being strangled and slowly suffocated, and in the end they chose the latter.


The Student-Loan Debt Crisis: The Making of a Lost Generation in the US ?

The main outlines of a potential lost generation are already becoming clear. A great many young workers today find themselves over-educated , over-qualified, un- or under-employed, living with roommates or back with parents, working jobs well beneath their educational level, and in debt for the education they hoped would lead them out of the lower ends of the labor market. One finds that this group has been delaying family formation, and delaying major purchases like houses, automobiles, and other "consumer durables". This is often attributed to this group typically paying off their loans over a much longer period of time than previous cohorts, which is itself attributed to the poor economic situation of the cohort of graduates that came into the labor market in and around the time of the financial crisis and the onset of the Great Recession. The unemployment rate among youth, as well as among college graduates, and the large increase in the rates of default on student loans gives some measure of the troubled economic situation many recent graduates face. The rise in forbearances, and Income-Based Repayment ( IBR) enrollments, because they deflate the default rate, offers an important insight into the poor situation recent graduate face after they leave school.

Many factors contribute to creating this student loan crisis and a potential lost generation. The first factor to notice is the increasing democratization of college and the college culture beginning with the mid-20th century middle class. Following Thomas Piketty's analysis, one should see the period after the World Wars and the Great Depression as a historically unique, and unprecedented epoch. In Piketty's terms, this was the first epoch in which the rate of return to labor was higher than the rate of return to capital. That is, for Piketty, this was a period in which the fundamental law of capital, as had been observed for several centuries, was reversed. This happened, Piketty argued, because of the dramatic, indeed unprecedented, social, political, and economic changes made necessary or expedient by the upheavals of the 1914-1945 period. In order to win the wars and combat the depression, governments across the capitalist world made concession to the workers movements which had been gathering momentum since the late 19th century. These accommodations, and the government intervention needed to achieve them, resulted in the reversal of Piketty's historical law of capital.

In practical terms, these policies left workers, especially those in the US with much more disposable income than ever before. The Baby Boom generation was thus able to go to college in record numbers, and achieve extraordinary social mobility because of a fortuitous confluence of historical circumstances. The parents of the Baby Boomers enjoyed the kinds of economic conditions that allowed them to afford the things which came to characterize the American middle class lifestyle; suburban houses, multiple automobiles, family summer vacations, college educations for children, retirement savings, et cetera. Because the Baby Boom generation was able to go to college, and as a result, attain professional success, and therewith social mobility, they quite naturally passed on these lived experiences as expectations for their children.

And for a generation or so this pattern worked. Young middle class-ish people graduated from high school, went to college, got jobs, moved out on their own, got married, bought houses, had children, and reinforced for those children the importance of going to college. Yet, as macro-economic change occurred, driven by neo-liberalism, and as the labor market came to contain more and more workers with college degrees, the pecuniary advantages attached to college degrees began to erode. Yet, as the economic advantages of a college education diminish, the dominant cultural narrative, at least for the "middle class" and those who aspire to it, is that the path to a good life runs through a good job with a high salary, and one gets this by having the right skills, and these one acquires in college. So, whether it is necessarily a good idea or not, millions of young Americans aspire to, apply to, and enroll in American colleges. Most do this in the hope of being able to get a job which will pay them enough to live a comfortable life.

Also contributing to this crisis is the rapidly rising costs of college. As more and more students were able to muster the financial means, largely due to continued access to "easy money", that is an excess of cheap credit in the financial system, to register effective demand on the market college became a big business. As enrollments continued to grow, this business grew. There emerged an arms-race dynamic among colleges, which has only intensified, and spread over time. This arms race is based on the need for colleges to attract students, and involves spending money on buildings, facilities, amenities, technologies, events, and more to attract students. At the same time as this arms race drives up costs, so too do the ever inflating salaries of the typically expanding ranks of college administrators. Making the situation even worse is the fact that concurrently with the latter two sources of cost inflation, is the fact that state financial support for public education, on all levels, not just higher education, has deceased markedly over recent decades. Thus, as a result of neoliberal efforts to decrease taxes on the wealthy, the costs of education are being born more and more by students and families, driving many of them into debt, or deeper into debt, in search of the prospect of the social mobility they think a college education can provide.

The reality of the present situation is that the labor market that many post-crisis graduates have found themselves in is decidedly not favorable. The macro-economic shift in employment in the US predominantly to the service sector, and systemic forces inherent in capitalism that produce persistent pressures toward automation, have combined to create a labor market in which job growth is concentrated in the high and low end segments. Computer and internet technologies have facilitated a great deal of further redundancy of human labor in the production process for many manufactured goods. They have also rendered large amounts of human labor unnecessary in other sectors by automating via digitization, various customer service operations or routine business functions. Globalization has also helped hollow out the old middle class by moving out of the country the kinds of skilled and semi-skilled manufacturing jobs that did not require college education.

In 2011 the Occupy Wall-Street movement burst dramatically onto the scene in America. This movement gave voice to the first stirrings of large-scale anti-austerity sentiment in the US. Many graduates who entered the labor market at the time of the crisis and its immediate aftermath, had by 2011 experienced the effects of the economic crunch. This movement brought many of these people together through their shared experience of disillusionment, and social as well as economic dislocation. The recent emergence of the Corintian15, which very quickly became the Corinthian100, and the student-loan debt-strike movement, shows that this movement is not dead. Instead, this movement is gaining momentum as the economic situation for more and more young workers becomes more and more desperate. As the student loan crisis continues to build, and as austerity and neo-liberalism dominate the policy response, the resistance movement will only spread. Though capitalist elites, through municipal governments nation-wide, were able to suppress the initial incarnation of the Occupy Wall-Street movement, the basic social, political, and economic conditions that created it remain.

If the austerity-driven response continues, a lost generation is exactly what could emerge in the US. The impact of the most recent crisis is still being felt, and little in the way of recovery has trickled down to many of those displaced by the crisis, or the Great Recession which followed it. And there are other groups besides young graduates who face uncertain economic futures. Older workers pushed into early retirements despite smaller pensions and rising costs. Pensioners and the elderly, who are already largely marginalized in society, also suffer. Middle-aged workers displaced from their jobs during this past crisis have had a quite difficult time finding new employment, at least at the level of their previous job. This is exactly the broad base of suffering that unites many in Greece against neo-liberalism. The young, and recent graduates, are not the only ones to suffer, nor are they the ones who suffer the most, just as in Greece.

However, the current cohort of young Americans is the most well-educated in the nation's history, indeed, college degrees are more abundant than ever. Every social group seems to be experiencing growth in the rate of college degrees; though disparities between racial groups persist, and indeed increase. The current narrative in the dominant culture about how to achieve "middle class" social mobility, is still to get and education, i.e. go to college. Throughout the post-war period, in order to facilitate economic growth, by way of personal development through education, the US government increasingly helped make money available to help more and more people attend college; this, of course, began to change with the rise of the ideological hegemony of neo-liberalism. There is thus a sinister bait and switch at play between the narrative about college and mobility, and the social reality of these. Students are encouraged to take out increasingly more in loans, so as to afford to go to college, in the hopes of getting a job that pays enough to live on. When graduates emerge from colleges, what they find is a labor market overflowing with college graduates all seeking employment in the fewer and fewer good jobs, for which they are all qualified, as well as for the growing number of low-paying jobs for which they are all over-qualified. Stultified by low wages, abusive scheduling, and a polarized labor market, this lost generation is already delaying family formation, and may in the future be marked by the kinds of increases in depression and suicide that we have already seen in Greece.

This post-crisis generation of graduates, which is still emerging into fuller maturity, has been set up to become a lost generation. They are likely, unless drastic policy changes occur, to endure economic lives in which they make less money on average over their working lives, have less secure employment, less secure access to healthcare for their families, less access to or lower quality of education for their children, less ability to afford to retire, and many other of the same forms of social and economic dislocation being experienced by workers in Greece. The social realty this post-crisis generation confronts can only serve to disillusion and disenchant, as it disenfranchises through poverty, austerity, and inequality. This post-crisis generation is well placed by socio-economic circumstance to experience the social, moral, economic, and political confusion and disorientation that characterizes a lost generation.

Bound to jobs that don't engage the talents cultivated by education, and that impose abusive workplace practices, in order to pay back student loans, this post-crisis generation is being groomed to become a dependent, and hence docile one politically. Given the poor state of the labor market, the rising costs of a college education, and the diminishing return on a college education, student loans are taking longer and longer to pay off. In many cases this process can stretch out for decades, becoming in essence life-long debts; or, at least, debts that will require the bulk of one's working life to discharge. These student loan obligations thus keep young workers feeling insecure, and beholden to their employers, if they're lucky enough to have jobs.

From the point of view of elites, of entrenched powers, education has always been a double-edged sword. On the one hand, one wants the fruits of scientific, philosophical, and artistic discovery and achievement. For, indeed, these are the hallmarks of civilization, of progress, and of enlightenment. On the other hand, the more education is allowed to be received by more and more "lower" ranks of society, the more questions start being asked about the nature of the social order, and about potential changes. Education is a pandora's box in this way. Once people acquire education, it can't be repossessed, and there is little way to stop people from passing it on to others. For example, once a person learns to read, there is often little authorities can do to stop people from reading subversive material. The long history of underground, or samizdat, literature, especially of a political nature, in most Euro-Atlantic societies evidences this. Thus, while the increased access to education, especially higher education, for the Baby Boomers, and their children, is great for those individuals, from the point of view of elites, this educational democratization was lamentable. Indeed, the revolutionary 1960s and 1970s were to some degree enabled by high levels of access to higher education, but on affordable terms, that is, without high levels of debt. Even though this was the tail end, this was still an era of social investment in education.

With the rise of neo-liberalism beginning in the mid-1970s, came continuing waves social dis-investment in education on all levels. Along with rising costs, shifts in the tax burden and stagnant wages led many working-class and poor families to bear more and of more the costs of education, particularly higher education. This served to price some out of the market, however the decline in government support for education was replaced by the increased availability of loans. This is in some measure due to the re-rise to dominance of finance capital, and the need for monopoly capitalism to generate bubbles in order to spark growth. In any event, more and more working-class and poor individuals and families took on increasing amounts of debt in order to acquire college educations.

However, rather than achieving the same kind of easy mobility their parents did, this first generation under neo-liberalism was marked by the effects of stagflation and austerity, multiple recessions and stock market collapses, and the Savings & Loan Crisis. Thus, in the early 1990s, one sees this generation become "Gen X", the cultural emblem of which became the un - or under-employed, aimless and cynical, "slacker". Before the unbridled optimism and euphoria of the Dot Com Bubble set in, Gen X was a potential lost generation. The apathy, dislocation, disillusionment that characterize the artistic and cultural products of this generation showcase the sense of being lost, of lacking grounding and guidelines that mark the experience of lost generations. By the mid-1990s however, the economy began to pick up, eventually becoming the tech, or dot com, bubble, and many former slackers and "grunge" kids became successful professionals in a suddenly more hospitable labor market.

Between the mid-1990s and 2007-2008 the US economy was buoyed by a succession of asset prices bubbles, or episodes of speculative mania. These bubbles prevented a lost generation from emerging beyond the early 1990s. Moreover, the effects of neo-liberalism had a beneficial effect on working-class and poor households in the form of cheap goods, particularly textiles, from Asia. Cheaper basic goods, like food and clothing, imported from the Third World had a wealth effect on many American households. A rising stock market also contributed to this feeling as well, for those who owned stock, which was increasingly many. This continued to allow many working-class families to send their children to college, and with a booming economy many were able to get good jobs and achieve social mobility. However, a lingering specter of the potential lost generation of the early 1990s was the emergence in the late 1990s of the anti-globalization movement, announced forcefully by the 1999 anti-WTO protests in Seattle.

When the economy was rising, young workers could be bribed into being politically neutral through jobs that pay enough to afford "middle class" luxuries. Individuals become bound to their jobs in order to pay for the things that they own. The price of material comfort and convenience is thus obedience and passivity, it is the faux choice to be a consumer rather than a citizen. In a rising economy, debt, especially for education, can be seen as an investment in oneself, in one's own future. Since an expanding labor market is likely to provide one with a salary that enables one to repay the loans in a reasonable period of time, this investment can often be a good one. When, however, the economy turns from boom to bust, debt serves as a set of financial shackles. Whether in boom or bust, capitalism requires that workers be bound to their jobs, i.e. be dependent on their employer and the wages he or she pays. Thus, either preparing the way for entrance into a gilded cage, or confining one to an only quasi-metaphorical chain-gang, student debt serves the interests of capital. Some, capitalism rewards with high salaries, their obedience and loyalty is bought and paid for, since the employees material position is dependent on the employers' wages. Others capitalism condemns to various forms of forced labor in order to enforce obedience to its regime of surplus-extraction, and to stifle much revolutionary activity.


Slavery, Debt, & Peonage

Debt has been used by societies throughout history in order to coerce some people into performing coerced, that is, un-free, forms of labor for others. This is the history of class society, debt is the mechanism by which workers are incorporated into the apparatus of exploitation, that is, of forced labor. This is something which David Graeber is keen to point out throughout his book, "Debt: The First 5,000 Years". The basic point of debt is to control the labor of others. Once one controls the labor of others, one can use it to one's own advantage, to increase one's own position. This fundamental tenet remains true today, debt is used as leverage to achieve control of others' labor, and therewith their lives and their futures. Young people today, who want to go to college, are being forced to mortgage their future betting that their college degree will help them secure a job with a high, or perhaps just stable, income. Coming out of school in debt ensures that graduates must seek wage employment to repay their loans, that is they must remain politically neutral; or at least confine their activism to the bourgeois-approved, "democratic" methods of protest.

The reliance of class society on un-free labor can be seen even in its most liberal moments, for example, the various times when slavery has been "abolished". The formal abolition of chattel slavery, or simply its disappearance, may seem to evidence a rising tide of liberalization, however, in most cases slavery is simply replaced by a new form un-free labor. Class society is a mechanism for extracting un-free labor from some for the benefit of others. So, for example, upon the abolition of slavery one very commonly sees the institution of various forms of serfdom, share-cropping, and tenancy relations between former slaves and former masters. In practice these systems perpetuate the social, political, and economic dominance of the former elites, as well as the subjugation and servility of the former slaves. One sees this process unfold time and time again. From the disappearance of slavery after the collapse of the Western Roman Empire, to the abolition of slavery by British in early 19th century, or to the abolition of slavery by the Americans in the middle of the same century, the ostensible rise in social status by former slaves was undercut by the imposition of new forms of coerced labor.

Central to this process is debt, that is, the creation of debts, which once acquired will serve to bind former slaves or serfs to their former owners, and former occupations. Since salves come into the society with no possessions, or at least little to no savings, they quickly find the need to take on debt to get by, and thus become locked into a cycle of debt and dependence whereby their labor and lives are largely controlled by the obligation to repay the debt. Necessities like food must be bought, and once slavery was abolished former slaves were no longer provided with food, however meager and putrid it often was. Former owners readily offered employment to their former slaves, because they were already familiar with the routines of the particular labor process, not to mention already physically present. Cash advances on the wages employers were now required to pay legally free workers was a very common way of creating initial debts, which would routinely spiral into large debts; debts of a size that turned formerly free persons, even if only nominally so, into debt-peons, i.e. un-free, or bonded, laborers.

In America, the transition from slavery to share-cropping in the post-Civil War period is a very clear example of this process of creating debt-peons. After the war, and even after the so-called Reconstruction era, former slaves were returned to a condition not much different from that which they suffered under slavery.[1] This was done by imposing on former slaves a vicious cycle of debt, poverty and dependence, which economically and politically disenfranchised them. For example, see the ubiquitous "black codes" that arose during Reconstruction. These were as much about enforcing social norms, but also, and equally importantly, they regulated labor in the post-war South. [2] Since, due to the economic effects of the war and of emancipation, most southern farmers could not afford to re-employ their former slaves as wage-workers because they lacked sufficient capital; that is, even if the recently freed slaves were willing to go back to work, which many were not. Thus, sharecropping was the expedient that was resorted to most often. Through the law, and other legal devices, white southerners shifted all, or the proverbial lion's share of the risk, onto what were, ostensibly, their new business partners. The black codes, also, through criminalization of vagrancy, always disproportionately enforced on blacks, forced many former slaves back into their old jobs.

This latter leaves out the effects of the rampant, naked, and direct white-supremacist violence perpetrated against the newly liberated African-American population. Thus it was, through debt and violence, that the newly freed African-Americans were bound to their former masters, and thus forced to continue to work at their former occupation, cotton farming. The historical experience of many coal miners, and other industrial workers, especially those having lived in company towns in America, also very clearly displays the process whereby workers' debt are used to entrap workers, and force them into a condition very much like slavery. Most newly freed slaves ended up facing a choice, especially after the end of Reconstruction, between working their old jobs as sharecroppers, or being arrested for vagrancy and being sentenced to forced labor. In either case, the newly liberated slaves were forced back to work, often for their former masters.

The same process of creating debt-peons observed in the American South after the Civil War, in the main outlines, occurred earlier in the 19th century after the British abolished slavery. Outside of those in the actual slave trade itself, this policy change primarily affected the British sugar industry in the Caribbean.[3] Former slaves were very commonly re-employed as wage laborers on sugar plantations, typically for very low wages. After cheap African slaves could no longer be acquired, plantation owners began to import cheap laborers from other parts of the world, primarily East Asia and the Sub-Continent. These laborers were routinely entrapped after arrival in the Caribbean owing the company, or perhaps some type of agent or broker, for transport and provision, as well as the very common cash advance. Cash advances were very often quickly spent, either through consuming necessaries like food, through dissipation, or through being hoodwinked. In many cases cash advances would be handed over to family in the locality where the laborer was recruited. This process of controlling cheap foreign workers through debt, and draconian repayment conditions, can be seen clearly in Qatar, particularly with regard to the building programme related to the World Cup tournament it will host in 2022.

Wage labor is also a form of slave labor, though more similar to debt-peonage than chattel slavery. If a rose by any other name would smell as sweet, then slavery by any name is always odious, and the opposite of liberty. Wage laborers in liberal-democratic regimes may have more social and political privileges than serfs or slaves, but they are in no wise the free laborers economic theory posits them to be. Wage labor is just another form of un-free labor. Workers, i.e. former serfs and peasants, were coerced into adopting the forms and routines of industrial life because they were forcibly deprived of, eventually, all means of sustaining themselves without recourse to wage-paying employment. The social, economic, and political transition from feudalism and mercantilism, to commercial and industrial capitalism created an industrial proletariat, a working-class, where none existed previously. This was a violent, disruptive, and often chaotic experience for these people, who in this fashion bore the brunt of the costs of the process of creating liberal-democratic, capitalist regimes.

Just as it was thousands of years ago, debt works to keep poor people working for rich people, who can then accumulate great wealth as a result, which is the ultimate goal. David Graeber describes how debt functioned in ancient Sumer to bring poor farmers, and their produce, under the control of the temple-industrial complex. The fastest and easiest way to create debts would be, of course, to levy a tax, which could be paid in kind rather than in coin; the requirement to pay in coin was related, as Graeber shows to the desire of early states to equip and provision armies. Thus, debt, along with military force, allowed the palace-temple complexes to accumulate the provisions that sustained its inhabitants and the raw materials its artisans required. So it is still today, debt continues to work to bind the working-classes to occupations that further the accumulation of wealth by the elites, social, political, and economic, of a society.

Young people across the US, and around the developed world, have been sold a narrative, for more than one generation now, that led them to believe that higher education was the path to social mobility and economic prosperity. In order to roll the dice and take their chance, a great many working-class and poor families and individuals have take on more and more debt so as to pursue education, higher education in particular. Now, in a post-crisis, recessionary environment, what was years ago an investment, is now increasingly an economic albatross. Left largely to fend for themselves in a confusing, and unfavorable labor market, wherein they are often over-qualified for the kinds of jobs which are available, young people across the US, and indeed across the industrialized world, are at grave risk of becoming a lost generation by way of becoming, in essence, debt-peons as a result of their getting an education in attempt to better themselves.

This latter fate excludes those graduates who are lucky enough, through circumstance or planning, to be educated in highly in-demand and thus highly remunerated subject areas. If one, either by personal proclivity or cunning strategy, desires to be an investment banker, and one is good at it, then the rewards can be unfathomably large. If one can do well something the market highly rewards, then one can find their pursuit of an education in this subject profitable indeed. And if one is unfortunate enough to be interested in a subject, for which there is not great demand by capitalists, or the state, then one's pursuit of an education will likely be unprofitable, and result in a condition essentially the same as debt-peonage. Of course, in capitalism, the structure of outcomes in the labor market in regards to pecuniary rewards is colored to a great extent by personal connections, nepotism, cronyism, "inside baseball", "old-boys clubs", et cetera. Social class matters very much in the real-world sorting process in the labor market after college. Who gets what position, and for how much salary, is in many ways a heavily rigged game, especially now, as more and more, years and years of un-paid, or lowly paid, internships stand between new graduates and entrance into the professions they desire.


Avoiding a Lost Generation

The macro-level indicators, and general economic and social statistics at present are not positive, and the initial outlines of a crisis in the US are only now beginning to emerge. We are very much still in the early stages of this unfolding crisis, and there are still many possible lines of development, depending on the actions of various actors, e.g. labor, capital, and the state. On one, perhaps extremely pessimistic view, this potential lost generation could end up being a multi-generational crisis, that has a wide array of effects that form, develop, and blossom over several decades. On a more optimistic view, this "crisis" might amount to no more than a lost decade. Sure the labor market might be bad now, but that could change the next time the economy picks up. The important point to keep in mind is that the shape and scope of the crisis to emerge can be changed by conscious and deliberate action. Though a lost generation is looming, it is by no means inevitable.

One promising line of resistance to a potential lost generation is the debt strike being organized by the Strike Debt! collective around the Corinthian100. These students, defrauded by the predatory practices of the Corinthian for-profit college network, banded together in protest to declare that they would not repay their loans, deeming them to be immorally acquired, and thus illegitimate. Despite a negotiated settlement in March of this year, some former Corinthian students judged, and not unreasonably so, the terms to be insufficient, given the scale and scope of Corinthian's fraud, of which they were the victims. The rapidity with which the Corinthian15 became the Corinthian100 shows how wide the appeal of the original message was, and how deep is the feeling of betrayal an injustice felt by these students. The highly conscious predatory behavior engaged in by for-profit colleges like Corinthian makes the moral argument for a debt amnesty in this case particularly strong. The debt strike currently being organized may indeed by successful at provoking the state into taking precisely this action.

It is important to note that the amount of privately-held student debts is a small fraction of the total amount of outstanding student debt. Even an unconditional debt forgiveness for all Corinthian students, as well as for all other students at for-profit colleges, would not do very much to avert a lost generation. A debt strike could, however, do much to raise revolutionary consciousness among the strikers. Some who might otherwise never have been radicalized, or even exposed to radical ideas, can engage with them as a result of their personal experience. If the movement is successful in winning total debt forgiveness for Corinthian students, this will undoubtedly be a great boon to those who would be freed from those debts. This is no insignificant achievement. But, since most student debt is owned or backed by the government, and cancelling this debt as yet has no movement behind it, this post-crisis generation may very well end up knowing the experience of being lost.

One potential solution to the crisis would be some variety of Keynesian stimulus plan, or a 21st century New Deal. This would, quite naturally, require a great deal of state intervention in the economy. This latter is heresy to the current orthodoxy in economics, and moreover, there is a lack of political will to enact such a program. Yet, the logic remains as sound as it ever was, money spent on wages will have multiplier effects that work to increase output and employment. When workers get paid, they spend. This spending stimulates the economy by raising aggregate demand. Whether the private sector or public sector, wages are wages to workers, and the workers' expenditure is the income of the retailers, and their suppliers. America does not lack for significant projects, whether infrastructure, social services, or others, worth spending money on which could improve the quality of public life, and provide the kinds of opportunity and mobility that we saw in the mid-twentieth century.

The bourgeois-democratic state itself can take, and has taken, steps to blunt some of the worst effects of the student loan crisis, and the burgeoning lost generation. In 2013 Congress acted to lower interest rates on student loans, after the rate had risen earlier in the year. While this was no doubt a boon to many, it remained the case that students pay much more to be able to afford to go to school than do the biggest banks to borrow from the federal government. It remained the case that the federal government is attempting to make money from student borrowers. Moreover, it remained the case that US students take on a higher debt burden than students in other countries. Recently, President Obama took action to help ease some of the problems associated with student loans, especially in the repayment of these loans. His action this year follows another step he took last year to help student borrowers by limiting the percentage of their income that creditors could demand as monthly payments. Needless to say, these measure are good for the people they help, to the extent they actually work to reduce the financial burden student borrowers face in the repayment phase of their loans.

However, such measures, by blunting the most severe effects of the student loan crisis, serve to forestall any larger economic or social crisis emerging out of the student loan crisis. These policies also work to forestall the worst, but also potentially most politically radicalizing, effects of the experience of being in a lost generation. Thus, the action of the bourgeois-democratic state is a double-edges sword. While the amelioration of financial hardship is good for those suffering under them, it is also bad in that it forestalls the development of the revolutionary consciousness that is necessary to provoke radical social change. Just as in Greece, as elsewhere today and in numerous historical examples, the hardships and sufferings imposed by economic crisis would generate much solidarity and revolutionary working-class consciousness, and activism. Though this kind of radicalization is still happening because of the student loan crisis, it is at a much slower pace.


Conclusion

In some discussions of the student loan debt crisis the word "bubble" is used to describe the crisis. And, indeed, in the wake of the 2008 financial crisis it was fashionable for a time to attempt to predict the next bubble, especially after two successive bubbles were largely ignored until they popped. The comparison to a speculative "bubble" is an inaccurate characterization of the student loan debt crisis in some respects. It is inaccurate in that the student loan crisis lacks some of the important features of traditional economic crises associated with the collapse of an artificially inflated asset price. Instead, the collapse of the student loan "bubble", rather than causing an economic crisis akin to the collapse of the housing bubble, is likely to take the form of a lost generation.

The fallout of this crisis will be borne by young graduates and workers in the form of diminished lifetime earnings, chronic under-employment, delayed household formation, and increased dependence on employers and attendant political passivity. In this way, the comparison to speculative bubbles is correct, in that, just as has been the case with bubbles throughout history, it will be the smallest investors, the working-class people who buy into the market at the end of the boom period who bear the bulk of the costs of the collapse.

Despite record high levels of outstanding student debt, the crisis is not likely to cause widespread economic chaos as it erupts. First, historically, bubbles have typically arisen in the asset price of private, as opposed to public, goods. Because the US government and its immense financial resources backs the large majority of student loans, either by originating the loans in a federal agency or by guaranteeing payment to issuing private banks, there is unlikely to be a collapse in the asset price. Asset price bubbles collapse largely because investors lose faith in the future solvency of an enterprise, thus the backing of the government of the world's largest economy removes this latter fear in the case of inventors in student loan debt.

Even a debt strike by the whole population of student borrowers in the US would not necessarily work to burst this alleged bubble. Moreover, as was seen in the 2008 financial crisis, even when bubbles do burst bourgeois-democratic regimes often bail-out the wealthiest owners of the formerly valuable asset. Second, given that student loan debt totals just about 7% of US GDP, even a collapse of this alleged bubble would be unlikely to cause a large-scale economic crisis like the one seen as a result of the 2007-2008 collapse. While still an important drag on the macro-economy, the student loan crisis is not likely to be the epicenter of a future economic earthquake.

Not mentioned at all yet in this discussion are those students who take on debt to attend college but do not graduate. This group faces the same poor labor that market graduates do, remain saddled with the financial burden of student debt like graduates, however, dropouts lack a degree, that is, the credential that largely governs access to the higher paying segments of the labor market. Though it remains true that college graduate tend to earn more over their lifetime than non-college graduates, college dropouts combine the worst of both worlds; the debt of college attendance, and the diminished economic prospects of non-graduates.



Notes



[1] For an excellent discussion of this see Zinn, Howard. "Slavery Without Submission, Emancipation without Freedom". A People's History of the United States: 1492-Present. 1980. Harper Perennial, (2003): 171-210.

[2] See Brands, H.W. "The Conquest of the South". American Colossus. Anchor Books (2010): 135-166.

[3] For an excellent description of this process see, Abbott, Elizabeth. Sugar: A Bittersweet History. Duckworth Overlook: 2010.