Argentine Default, Vulture Funds, the Debt Business, and You

Nicholas Partyka I Social Economics I Analysis I September 26th, 2014

If you're not terribly interested in financial news or world affairs, then you might have missed the story of Argentina's default at the end of July. If you're a casual news reader you probably came across at least a headline informing you of the fact that Argentina had defaulted on its debt again. The event itself received some, if not a lot, of coverage in the dominant US media. Most everyone carried a story about Argentina being declared to be in "selective default" by Standard & Poor's. Most of these articles made sure to point out, in some more or less subtle fashion, that this is not Argentina's first time defaulting on its debts. Most also made sure to insinuate, if not unequivocally declare, that all the trouble is Argentina's fault, that poor economic management by Argentine policy makers is wholly to blame.

Part of why this default by Argentina was given a bit more play in the dominant media spin cycle is that it is the result of a legal ruling by a judge in New York. Thomas Griesa, a US District Court judge, ruled on August 1st that Argentina could not go ahead with its plan to repay creditors. A deal to do this had been reached between Argentina and the vast majority of its creditors, about 93% of them. The money, some $539 million, had even been deposited in a major US bank, the Bank of New York Mellon, for that exact purpose. The judge's ruling meant that these funds could not be distributed by the bank to Argentina's various creditors.

Another big part of why this story received so much attention in the dominant US media was that some of the protagonists, or more correctly the villains, in this drama were US-based companies. In particular, some prominent hedge funds, e.g. Elliot Management Corporation and Olifant & Aurelius. They are the main forces behind the lawsuit that was attempting to prevent Argentina from paying-off its restructured debts. It was this small group of creditors who were the beneficiaries of judge Griesa's determination that Argentina's plan to repay its debts could not go forward. After the ruling was announced, Argentina tried to reach another arrangement in negotiation with creditors, but could not. This forced Argentina into position to default. Technically, Argentina chose default by choosing not to repay its creditors in the way required by judge Griesa's ruling. The ruling would have forced such egregious terms on Argentina that it is appropriate to say that Argentina was forced, one might say coerced even, into default.

So what does Argentina's default matter to ordinary people in the US? Many might think nothing. I mean, Argentina defaulted, so it's going to be the Argentines who bear the brunt of the consequences, right? This default could impact Americans in that Argentina's default might trigger an international financial crisis. This was unlikely to begin with, and the events of the last month and change show that there will be little to nothing in the way of major international financial repercussions from Argentina's default. If the default has not already created a panic, it is unlikely to do so now. So, if Americans will not feel any financial effects from Argentina's default, why should they be interested in it? Why should this story matter? Argentina's default should matter to us not so much because of how it might potentially affect our economic well-being, but because of what it can teach us about the debt business, both at home and abroad.

Looking at Argentina's experience with these vulture funds we can more easily perceive the structure of the debt business here at home. The debt business is an international one, and it certainly ensnares a great many Americans, just as it does those in impoverished nations around the world. Indeed, according to some estimates 77.5% of American households are in debt. In fact, another recent report claims one in seven Americans is being pursued by a collections agency for unpaid debts. What we'll see is that the debt business is predatory. It's a business whose most shocking feature is that it is completely legal.

Background: Prelude to Default

History can be funny sometimes, and in some cases this sense of humor can be downright cruel. It is in this sense that we should note that the country of Argentina derives its name from the latin argentum, meaning silver. However, the irony does not stop there. The river running through the capital, Buenos Aires, is the rio de la plata, the silver river. We note these recherché points because Argentina is, and always has been, seen an immensely wealthy place. This perception of wealth, as well as the actual fact of the large endowments of natural resources and human capital possessed by Argentina to this day, stands in contrast to its other image, that is, as a default prone economic basket-case. How do we make sense of this contradiction? What should we make of a wealthy country that so often does not pay its debts?

This is not the place to give a full economic and political history of Argentina, as interesting as that would be. So the story we're telling here is somewhat truncated, in that it begins with Argentina's last default. The beginning of this story is in December 2001 when the IMF declined to provide further funding to the Argentine government. This decision caused massive economic and social dislocation in Argentina. It triggered one of the largest waves of protest in Latin America since Venezuela's Caracazo. Both protests were ignited by a specific event, but very quickly came to be seen as symbolic of deeper, much longer standing social, political, and economic greivances and inequalities. It is with this default on its debts, the economic and political turmoil that resulted, and the later restructuring of these original debts, that the now more than decade long legal battle, whose latest chapter was judge Griesa's July ruling, began.

Let us pause before delving further into the story of this legal battle. As I just said, this is not the place for a full history. But some sense of context must be given, for Argentina did not magically acquire debts in the late 1990s, upon which it then defaulted. By most reputable accounts, the current debts Argentina is trying to discharge were accumulated during its last military regime. By its end, this regime had accumulated about $45 billion in foreign debts. This, just for those who may not know, was the regime that "disappeared" tens of thousands of people, all for the suspicion of potential "subversive" actions or thoughts. This was done with the knowledge of the US, which supported the regimes' actions against suspected communists. This regime was the recipient of much US economic and military "aid" in this period. This is just one of many instances of brutal regimes condoned by the US because the people they claimed they were killing were communists, or communist sympathizers. A similar phenomenon occurred in Indonesia (1965-1966), in Chile (1973-1990), and in El Salvador (1979-1992), to name only a few examples. This fact about the origins of the debt now attempting to be collected is rarely ever mentioned by dominant media outlets when they report this story.

It is true that the Argentine government, post-restoration of civilian rule, did play a role in accumulating debts. And this was as a result of bad policy. Emerging from military rule in the 1980s, Argentina was a political and economic mess. Its levels of inflation in this decade are routinely used as examples of what can go wrong when inflation gets out of control. Facing this worsening situation, Argentine elites decided on a policy of pegging their currency to the US dollar at the rate of one to one. This practice was called "convertibility", because pesos could be converted into dollars on demand. This allowed citizens to use either currency interchangeably. This worked well for almost a decade, but only while the IMF continued to loan money to Argentina to support this policy of convertibility. Convertibility meant banks had to have lots of dollars on hand to redeem pesos on demand, this meant buying a lot of dollars in currency markets.

This latter can be expensive. Between incoming foreign investment funds, and IMF loans, Argentina kept up its convertibility policy, as well as achieved robust economic growth rates for the better part of a decade. During this decade Argentina was the poster child for neo-liberal economic reforms. Argentina, and especially President Carlos Menem, were constantly lauded for enacting economic reforms in line with the Washington Consensus' neo-liberal paradigm. This praise is and was somewhat disingenuous, as Paul Blustein describes in his book The Money Just Kept Rolling In (And Out) (2005). Argentina continued to get loans from the IMF, and others, in this decade despite not meeting the stated goals of the IMF's loan agreements. These loans always come with conditions attached, and what these conditions demand are often fairly standardized items. Sometimes they require governments to enact certain kinds of reforms, e.g. liberalize capital markets, or meet certain other targets, e.g. levels of government spending for example, levels of budget deficits, et cetera.

Argentina's default came on the heels of two major waves of crises in the international economy. It also came at the zenith of the renewed movement toward increased globalization in the 1990s, especially in finance and investment. Though not causally related to each other in a strong way, all these crises do have important structural similarities. Argentina, as the biggest, is remembered the most because its fall was the most spectacular. The Mexican peso crisis of 1994, the Asian crisis of 1997, the Brazilian and Russian crises of 1998-1999, and the Argentine crisis of 2001 are all examples of how vulnerable smaller economies can be in the face of the flows, both in and out, of highly mobile international capital. As Blustein notes, "The total assets under management by insurance companies, pension funds, and mutual funds in advanced economies totaled $34.7 trillion in 2001, a sum seven times as large as the value of all the bonds outstanding, plus all the publicly traded stocks, of all emerging markets combined. So even modest shifts in the way those trillions are invested abroad can have an enormous impact - either positive or negative - on emerging markets." All of these crises caused hiccups in the Argentine economy, but the effects were fleeting, and Argentina resumed solid rates of economic growth. The Brazilian crises is often thought to be a main precursor to the Argentine crises since it was temporally closest, and because it had the most direct economic impact on Argentina, as Brazil is major trading partner of Argentina. However, though Brazil's crisis did impact Argentina's economy, it was not the trigger event that brought it on.

This then was the witches' brew out of which Argentina's default was concocted. Emerging from a brutalizing experience with a murderous military regime, Argentina was saddled with an odious and onerous debt, which is why they then resorted to a bad policy, which only seemed to work while it was actively enabled by international finance, which then pulled the plug and fled with their profits just before the collapse. That collapse was initiated in December 2001 when the IMF declined to provide Argentina more loans. This meant the convertibility scheme, which was the cornerstone of Argentina's strong economic performance, could no longer be maintained. Without the large-scale influx of foreign cash it became very clear very quickly that Argentina would be unable to meet the debt servicing payments that would be owed. Going off the convertibility scheme meant devaluing the peso was inevitable. This forced the Argentine government to default on $132 billion in debts. In context, this was, at the time, one seventh of all money owed by third world countries.

As a result of the default Argentina had to devalue its domestic currency relative to the US dollar. There could no longer be a one to one conversion of dollars to pesos. This was such a problem in Argentina because people had developed too many economic relationships based in dollars, e.g. loans. Many of these relationships were shattered in the wake of December 2001 when the pesos was devalued. This was merely the first stage of devaluation. During the transitional period, called pesification, all dollar based holdings were converted into Argentine pesos at an official exchange rate. Later on, the peso was allowed to float freely in international currency markets. By the end of 2002 the peso had lost 80% of its pre-crisis value. For some this was advantageous since contracts with fixed prices in pesos would now be worth much less than they used to be, and thus easier to pay off in pesos. On the other hand, for those with fixed price contracts in dollars, these became near impossible to pay off for a great many as the peso lost value. Even when the peso settled around three to one with the dollar, this still meant that a great many people would be totally unable to pay off their debts with Argentine pesos.

The social fallout from a collapse of this scale can only be imagined by most in the first world, and even then only vaguely. A close analog today would be Greece. Except the collapse in Greece, having been "managed" by the troika (the EU, the IMF, & the ECB), has been slower, more deliberate. The social fallout has been similar in terms of the social dislocation caused bad economic conditions. If one could say by analogy that Argentina had its throat cut, then one could say that Greece has been slowly strangled. The major immediate effect of the economic fallout of the crisis was the outburst of social unrest now known as the cacerolazo, or the 'pots and pans protest'; translated more literally it means 'banging pots and pans'. These were originally peaceful demonstrations of the people's anger over the set of economic policies dubbed the corralito. People gathered in public spaces banging pots and pans, or banging on doors, or whatever would make a loud noise.

These protests evolved into acts of vandalism and property destruction, typically directed at banks and other financial institutions. Quickly enough, confrontations between citizens in the streets and police became frequent. Tensions mounted as protests continued, some violent, though mostly peaceful. The situation exploded right before Christmas with large street clashes between protestors and police. Some protestors were killed in two days of intense protest, and unrest. This led to the fall of the government of then President Fernando de la Rua. This initiated a political constitutional process that would see Argentina go through four Presidents in less than a month.

One of the other main effects of the economic crisis was the rise in the numbers of cartoneros, or 'waste pickers'. In the wake of the default unemployment in Argentina soared. Thousands of workers were turned out by their former firms, though to be fair, many of these firms simply ceased to exit. We should not neglect to note that some of this unemployment was caused by strategic closings of certain businesses as multinational firms' positioned themselves to profit from the turmoil. This kind of story can be seen in the film The Take. In either case, thousands of people were forced to rummage through the trash looking for food, or for valuable things to sell, in order to survive.

By the end of 2002 the Argentine economy had shrunk by 20% from its 1998 level; 50% of Argentines were poor, and a full 25% were indigent. Though the fall was spectacular, Argentina rebounded relatively quickly. By the end of 2003 the exchange rate had stabilized around three pesos to the dollar, and the economy was growing at an annualized rate of 8.8%. This by no means implies that all the damage has been undone from the 2001 crises, far from it. This crisis has had profound and far-reaching effects on Argentine society, the repercussions of which are still being felt in Argentina today. Importantly, these repercussions extend well beyond just Kirchnerismo. However, without a doubt, strong economic growth figures over the next several years after the 2001-2002 collapse did help alleviate some of the suffering.

Basta Buitres!

In the wake of this default many creditors believed that they would never get any money from Argentina, and sold the debt they owned for a fraction of its nominal value. This happens in what are called secondary markets. The primary market in this case is the bond market. This is where, to put it plainly, countries offer promises of repayment with interest for cash. So, when Argentina defaulted many creditors believed they would never get the full value of their investment back, and so decided to take what they could get from any interested parties in these secondary markets. It is in these secondary markets that the so-called "vulture funds" do their work. Some of Argentina's debt was purchased by a few of these vulture funds in secondary markets, often for pennies on the dollar.

Vulture funds make money doing this type of operation hoping that the borrowers' fortunes turn around and they repay the value of the loan in full. However, betting on comebacks and being successful is not the only facet of their business. In most cases the vulture funds undertake to have to the full amount repaid, or as much of it as they can get. Almost always this implies legal proceedings, which are, of course, very expensive. The debt vultures' main strategy is to utilize the power of courts to coercively enforce payment from the debtor. This routinely provides a nice spread over the purchase price for the vulture fund, even if they only recover a portion of what is actually owed. Poor countries, like poor persons in our own country, have a finite ability to pay for legal battles. The pressure to reach some kind of settlement is often, as is so tragically often in the US justice system, on the victims.

After the collapse of 2001-2002, Argentina recovered somewhat and tried to come to some agreement with its creditors. Even after its recovery in the 2004-2006 period, Argentina could not come close to being able to repay the full amount it owed to international creditors. Thus, Argentina reached agreements to restructure its debts in both 2005 and 2010. In both cases creditors agreed to accept far less than the face value of the loans in order to get some repayment. At the time, these agreements saw creditors take the largest "haircut" ever seen. Eventually most of the creditors, about 93% of them, agreed to take about 30% of the face value of the amount owed. It was towards this settlement that the lawsuit filed by the vulture funds objects. If Argentina goes ahead and pays back only 30% then the vulture funds who own Argentine debt won't make as much of a profit on their investment as they think they're entitled to. It would be much better for the vulture funds to force Argentina to pay back the full amount, providing them with a very hefty return.

The owners of about 7% of Argentina's debt decided they were not happy with the agreement reached between Argentina and the rest of the creditors. They filed a lawsuit, and this suit worked its way through the court system until eventually it found its way to judge Griesa's desk. The lawsuit basically asks the judge to not allow Argentina to pay the rest of the creditors on different terms than themselves. The judge's ruling amounts to saying to Argentina, "you have to pay all creditors on equal terms, and since some of them still don't agree to the terms, you can't pay anyone". With this ruling the court ordered the bank responsible for these funds not to distribute the money. This blocking of their repayment plan is what forced Argentina into default again this year. Argentina tired to negotiate with the remaining creditors, but to no avail. The vulture funds are set on full repayment, while the Argentines say they will never pay a cent to the vulture funds.

Argentina has taken steps since its latest default to find a way around judge Griesa's ruling. Their most provocative move has been that they stopped doing official business through the Bank of New York Mellon. At present they are trying to go ahead with their repayment plan with the agreeing 93% of their creditors, and effect payment through Argentina's state bank, Banco de la Nacion. The Argentine Senate very recently passed a bill to do just this. They voted to relocate the debt payments by swapping outstanding shares for new ones, which can be serviced by the Argentine state bank. If Argentina can make this work, it will be a great victory for the victims of predatory foreign capital. Along these same lines, the UN recently voted on a resolution that advocated for the adoption of an international legal framework for regulation of the process of restructuring sovereign debts. It should be no surprise that most of largest creditor nations opposed this resolution, the US among them.

Argentina's fight is significant because if they can be forced to pay the full amount demanded by the vulture fund holdouts, then the balance of power in the domestic politics of countries around the world both rich and poor will only shift further towards transnational capital. The victory of the vulture funds will only further reinforce the principle that foreign capital is free to ruin developing economies, and profit on the rubble. A victory for Argentina would be a victory for developing-world debtors seeking to discharge the debt burdens, often incurred by brutal dictatorial regimes, that keep them toiling for what amounts to little in the way of real social or economic development. A victory for Argentina is a victory for national sovereignty, for the right of a people, tortured in an all too real sense, as well as a metaphorical financial sense, by and for their debts, to shape a new future.

The Debt Business in the USA

So what does this foreign financial saga matter to us here in the US? Why should we pay attention here to what happens over there? The quick answer is that the structure of the debt business is largely the same within the territory of the US as it is across international borders. Noticing the structure of how vulture funds exploit sovereign nations can help us perceive the structure of the debt business here at home, and how it exploits the poor. What we'll see is a predatory structure in which financial elites utilize their enormous pecuniary, legal, and political clout to exact repayment from the poor, and increasingly now from students, often with draconian measures. These can include wage garnishment, claims against tax returns, harassing phone calls, and more. In the US, the main weapon of many of these firms are lawsuits. In the last four years one company, Midlands, has filed eleven thousand lawsuits in several northern Virginia counties alone.[1] According to a 2010 report, from January 2006 through July 2008 twenty six companies filed more than four hundred fifty thousand lawsuits against persons in New York City alone.

Just as there are secondary markets for the debt of foreign countries, so too there are secondary markets for domestic debts in the US. All kinds of debts can be bought, often for pennies on the dollar. According to one report the average debt is bought by a debt buyer for four cents on the dollar. Companies buy this cheap debt and attempt to collect as much of it as possible. These companies impose harsh terms on those whose debts they buy, regardless of the suffering this imposes on persons. Many people in the US incur debts for a host of reasons, and sometimes these people end up not being able to pay back the loan. Once creditors judge that they stand little chance of getting their money repaid, they decided to sell it to interested third parties for as much as they can get. These third parties buy this cheap debt, just as the vulture funds buy foreign nations' debts, in hopes of squeezing a decent return out of debtors, by hook or by crook so it seems.

Several reports from just the last half decade have all uniformly cited serious malpractice in the debt buying and collections industry. The strong arm tactics of these debt collection firms fall disproportionately on the poor, and ethnic minorities. Horror stories along this line are all too easy to find. A few minutes on google would be more than long enough to find many stories of normal, hard-working people whose lives were turned upside down by unscrupulous debt collectors. What makes the debt collections industry so particularly nefarious is that all too often these firms lack sufficient proof that the individual they are attempting to collect from actually owes that debt. What the evidence suggests is that the debt business in the US is a fundamentally corrupt, and predatory industry whose profits are wrung mercilessly from some of the poorest people in society.

According to the results of that 2010 New York City study, a full 95% of persons with default judgments entered against them lived in low-income to moderate income neighborhoods. Further, 56% of these people lived in predominantly black or latino neighborhoods. Making matters worse, only about 1% of those sued by debt buyers had a lawyer to help them, and indeed only 10% of persons even responded to the summons. Lack of legal counsel on the part of those sued is certainly one reason why the debt buyers won their legal claims in nine out of ten cases. The overall picture of the debt business is hard to mistake. It is one of an industry that actively targets the poor and communities of color for predatory tactics designed to squeeze every cent possible out of those who already have a hard time meeting their basic needs, or those of their family. The results of the New York City study are compelling in this regard. 69%, nearly three fourths, of all persons sued by debt buyers were black or latino. More than one third of all these cases were very clearly without merit. Of these baseless lawsuits, 66% were brought against blacks or latinos. And to top it all off, in 71% of these lawsuits the individual was either not served legal paperwork or all, or was served improperly. And these are the results from just one major US city.

Thus, it is not just developing nations upon whom these financial vultures prey. Our fellow citizens also appear an appetizing meal to these vultures. Indeed, according to recent reports about one in seven Americans is currently being pursued by a debt collector. The title "vulture funds" is thus an entirely apt moniker, as it described their behavior perfectly, both internationally as well as domestically. In the wild vultures wait for carrion, for indeed, they are scavengers, they live by picking at the remains of what others have killed. In the economic jungle vultures do the same. They wait for financial misery to occur, and then try to pick the bones clean. However one happens to be economically ruined, the vultures will circle and attempt to get what they can. The major difference is that in the economic jungle the carrion is alive and human. The suffering is only made worse for people when these vultures show up. The unfortunate debtors are forced, like poor Prometheus, to watch as the birds devour their flesh. Whether one finds themselves in debt because of a medical bankruptcy, or because one makes wages too low to afford the basics of life without going into debt, or because one had one's identity stolen, or because of one's irresponsible profligate credit card spending, it matters not to the debt collectors.

To them a debt is a debt is a debt, and they are all opportunities for profit. If, on average, a debt buying firm pays four cents on the dollar for debts, then if it can collect even ten cents on the dollar from the debtor, then it has made a substantial profit when it repeats this operation thousands of times. And for this profit the firm merely had to increase the economic misery of thousands upon thousands of people by harassing, and legally intimidating them, and very often will little to no evidence that this particular individual owes the debt bought by the collections firm. This latter does not even begin to mention the questionably legal, to down-right illegal practices that debt buying firms engage in as they process and attempt to collect on the debts they've purchased.

Here is where we must confront the debt industries' propaganda about itself, if we are to get an accurate perception of the problem. They will claim that they perform an important function in healthy financial markets. The whole financial system would go south were it not for debt collectors they claim. Debt collectors think of themselves as reducing waste in the economy. A loan that cannot be repaid is an economic loss. The debt collections firm mitigates this loss by getting whatever amount of repayment it can from the debtors whose debt they have come to own. The debt collectors think they help prevent moral hazard problems in financial markets. Without them, they argue, how could one stop the economy from being ruined by people who borrow knowing there are no consequences for failure? Borrowers, on this view, would have no incentive to work hard, or try to make their economic activity go well if they could not be forced to repay the money they've borrowed. On the debt buyers' arguments, this would mean widespread inefficiency and waste in the economy, and thus a decline in productivity and living standards across society. Thus, the basic reason they give to justify their existence, and the horrendous way they treat people, is that things would be much worse if they were not doing this.

This is likely the place where defenders of debt buyers will trot out the example they think seals the case for them. This is the case of the reckless spendthrift. Is it fair that a person who racked up huge debts buying things they could not have afforded otherwise simply declares bankruptcy and then owes nothing? No it is not they would argue. This case though is very clearly a morally loaded example, one wherein an individual's own uncoerced bad decisions resulted in their financial plight. Maybe in this specific case one sees the unfairness to lenders, or the moral hazard that a consequence free environment might have. However, as much as the debt buying industry would like it to be the case, this kind of example does not represent the majority of debtors' experience. In fact, 62% of all bankruptcies in the US are caused by the expenses of treating some medical issue(s). Moreover, 40% of American households, due to financial constraints largely related to low wages, have to use credit cards to pay for basic living expenses.

What emerges is not a picture of financial market janitors that attempt to sweep up whatever crumbs they can, all in service of smoothly functioning financial markets, and the social prosperity they allegedly help create. Rather, what we see is an industry that consciously preys on the poor, and callously takes advantage of their misfortunes for private gain. To the trauma of, for example, a personal health problem and the resulting medical bankruptcy, or the death of a loved one and the subsequent funeral expenses, these vultures add the trauma of legal action designed to squeeze the individual until they pay whatever they can for as long as they can, or perish.

Historical Attitudes Towards Debt

In thinking about Argentina's default and the debt business here in the US we have been taking this notion of debt for granted. This notion is not as simple as it appears. David Graeber's very impressive work explores the history of this idea which is so central to modern societies. Very interestingly, he begins his book by telling an anecdote the point of which is allowing him to pose the question: One has to pay one's debts, doesn't one? The answer to this question seems so obvious, and yet it is the very obviousness of its answer to most that makes the posing of this question all the more radical, and challenging.

The highly provocative answer that Graeber's analysis leads to is that, no we don't "all" have to pay our debts, only some of us do. It will surprise few that that those who, throughout history, have had to pay their debt have been the poor, the working class. Elites have always loaned money to each other at preferential rates, and on easy terms. When elites loan money to the poor, to laborers, on the other hand, they do so at higher rates and typically on very severe terms. Graeber's descriptions of the practice of debt bondage throughout the history of the world demonstrate very well the kind of predatory activity that finance is, and has always been.

One really striking feature that emerges from Graeber's analysis is how often debts were cancelled in the ancient world. Cancellation of debts was a common occurrence. What Graeber shows is there was a recurring pattern where debts would build up because of lenders' predatory practices, social pressures associated with this then grow until they reach a breaking point. Once social pressures due to the negative effects of the lender's predation reached a crescendo a general debt amnesty, or jubilee, would be declared. Many people know of the famed Rosetta Stone. This artifact helped modern scholars be able to decipher ancient languages. Few remember what is actually written on the Rosetta Stone. What the text of the Rosetta Stone declares is just such a debt amnesty.

The burdens of debt slavery, in all its modern forms, weigh very heavy on societies around the globe. These burdens, as many in the ancient world realized, undermine the foundations of the kind of personal independence that makes for truly democratic polities. In ancient Athens those who had to work for wages, those who depended on others for employment, were not allowed to vote. Such people were not allowed to vote because their dependence on others made them unsuitable for democratic participation. If persons are dependent on others for access to their livelihood, then they cannot be relied upon to vote based on their sense of justice. Rather they can be counted on to vote as their patron would like them to vote. If one person depends on another for their livelihood, then that one would be hard pressed to vote for a policy that would be inimical to the interests of that other upon whom they depend.

In the modern world we are perhaps long over-due for a jubilee, for a cancellation of debts. It is time for emancipatory and democratic political movements to embrace debt cancellation as a central part of their agendas. There can be no real political liberation without debt amnesty. Whether debtors be the poor in our own country, or the governments of so-called "third-world" countries, debt burdens create subjugation, that is their point. In the ancient world, when debt-bondage became too burdensome for the people to bear they would opt-out of the socio-economic unit that was the ancient Mesopotamian city. Very often, as Graeber recounts, these former debtor would return to the city and forcibly cancel their debts. Just as debts create subjugation, so subjugation foments rebellion.

The US has, at present, at least one such movement which embraces this goal. This is the Strike Debt! group that emerged out of the New York City based Occupy Wall Street movement of 2011. The Strike Debt! group works to organize debt resistance on many fronts. They aim to end subjugation and exploitation by debt through organizing a debt strike. If debtors collectively resist exploitation by refusal to remit payment for their debts, they can abolish their unjust debts, and at the same time abolish the system of debt-based exploitation. In the meantime, the Strike Debt! group initiated the Rolling Jubilee project. Through this endeavor the group raises money, which it then spends buying up random Americans' consumer debts in secondary debt markets. These debts are then abolished. Thus far, this initiative has raised a little more than $700,000 and abolished a little under $15,000,000 in debts.


· "Debt Collections and Debt Buying: The State of Lending in America & its Impact on U.S. Households". Center for Responsible Lending. April, 2014.

· "The Structure and practices of the Debt Buying Industry". Federal Trade Commission. January, 2013.

· "Past Due: Why Debt Collection Practices and the Debt Buying Industry Need Reform Now". Rachel Terp, East Bay Community Law Center & Lauren Browne, Consumer Union of United States. January, 2011.

· "Debt Deception: How Debt Buyers Abuse the Legal System to Prey on Low-Income New Yorkers". The Legal Aid Society, NEDAP, MFY Legal Services, Urban Justice Center. May, 2010.

  • Blustein, Paul. And the Money Kept Rolling In (and Out): The World Bank, Wall Street, the IMF, and the Bankrupting of Argentina. Public Affairs, 2005.
  • The Take . Dir. Naomi Klein & Avi Lewis (2004). Film.
  • Graeber, David. Debt: The First 5,000 Years. Melville House Publishing, 2011.

· For information on the current debt resistance movement, and how to get involved, see, and their Debt Resistors' Operations Manual (

· To support the work of Rolling Jubilee campaign with money, or by getting involved, visit