Tuesday, 24 September 2013

The problem of debt

Ever since the financial crisis of 2008, debt has been seen as a problem. Not just public debt—about which we are constantly hearing - but private debt too. Governments, people, businesses and banks are over-indebted and struggling to survive. Banks have failed and been bailed out by governments: people have lost their homes and their jobs: businesses have failed, particularly in the construction industry: governments have enacted painful spending cuts and tax rises to get public debt under control: some governments have defaulted on their debts.
In its simplest form, debt simply means an obligation. When someone has done something for us, freely and without payment, we say “I am in your debt”, and we intend to “return the favour” at some time. That is a debt—but it is a debt voluntarily entered into between two people who basically like each other. The “debt” is no debt if it the service from which it arises is done out of love.
Debt becomes a problem when there is no love between the participants—when it is either a business deal or exploitation. In its worst form, debt can be a form of bondage: human trafficking often involves loading those trafficked with debt that they can never repay, which prevents them escaping from their life of servitude. But debt freely entered into can also become a problem, if the debts become unpayable, for example if the debtor’s income falls. That has become the situation for far too many people in the last few years. Real incomes have fallen by 10% since the financial crisis, which doesn’t sound too bad until you realise that the top 1% have seen their incomes rise in the last three years…..many people’s incomes have fallen by far more than 10%. For people who perhaps took on too much debt in the years before the financial crisis, an income fall of that magnitude is crippling. Many people who could comfortably manage their debts prior to the crisis are now struggling to make ends meet. All around us there is evidence of distress: increased referrals to foodbanks, increasing use of payday lenders, increasing rent and mortgage arrears, people struggling to pay energy bills, children arriving at school hungry.
Debt, sin and forgiveness
Our attitude to debt is deeply coloured by our moral values. I am constantly struck by the criticism implied in the word “debtor”, particularly by those who have no debt themselves—even though they may have had debt in the past. Debtors are routinely described as “profligate” if they are unable to pay their debts, even if at the time that they entered into those debt agreements their income was easily sufficient to service them. It seems that morally, we are not far removed from the time when debtors were consigned to prisons such as the Marshalsea until they could pay their debts. Imprisoning debtors is mentioned by Jesus in the parable of the unmerciful servant in Matthew 18:21-35, who was forgiven by his master for gross debts but then demanded payment in full from everyone who owed him money, however small the amounts. His master found out about it and cast him into prison “until he had paid everything he owed”. But Jesus’ point is not that unpayable debts deserve imprisonment. Far from it. His point is that debts can, and should, be forgiven. In our criticism of those who, for whatever reason (including mismanagement of their finances and outright overspending) have amassed unpayable debts, we seem to have forgotten Jesus’ criticism of the man who showed no mercy to his debtors. In Jesus’ eyes, it is those who will not forgive debts who should be imprisoned. After all, God has forgiven us far, far more.
Some of you may think I am misusing this parable. After all, it is really about forgiveness of sins, not debts. But debt and sin are closely related—so closely that in the Bible the two words are used interchangeably. And in German, the word for “debt” and the word for “sin” are the same: “Schuld”. If you think about it, “forgiveness” is always about wiping out an obligation that cannot be met—and if ever there were an obligation that cannot be met, it is our obligation to the God who created us and from whom we have turned away. We are deeply, deeply indebted to Jesus, who took upon himself the burden of our debt to God. But remember that an obligation founded on love is no obligation. Jesus took the burden of our debt upon himself out of love, and in so doing freed us from any obligation except to love him in return. That is how the slavery of sin becomes the freedom of love. 
We could choose to forgive financial debts. But as a society, we have forgotten how to do this. Instead, we force people—and, in Europe, whole countries— to maintain debt service even at the expense of essential living costs or at the price of going even deeper into debt. Borrowing at ever higher interest rates to service existing loans inevitably leads to default, but loan sharks make a lot of money from people in this death spiral….and loan sharking, it seems, is becoming respectable. 
Judith Armitt, Lay Reader at All Saints Church, Frindsbury, recently gave a sermon in which she criticised lenders who exploit the vulnerable. She cited St. Paul’s list of morally unacceptable practices in Colossians 3:1-11:
“Since, then, you have been raised with Christ, set your heart on things above…..not on earthly things…..Put to death….whatever is in your earthly nature: sexual immorality, impurity, lust, greed, anger, rage, malice, slander, filthy language. Do not lie to each other.”
Highlighting greed and lying, she castigated Wonga and other high-interest payday lenders:
“Don’t pretend then it’s all right to lend to people who have very little, at huge rates of interest they shouldn’t have to pay”.
She is in good company. The Archbishop of Canterbury recently criticised payday lenders for their astronomical rates of interest, and committed the Church to supporting and if necessary creating credit unions as direct competitors to payday lenders, offering short-term loans to those who need them at much lower rates of interest. It remains to be seen how well his initiative succeeds: the Church is already creating a staff credit union, and the Government is supporting the Archbishop’s scheme.
However, not everyone is convinced this is such a good idea: after all, if someone is so deeply in debt that they cannot afford basic essentials, it is debt relief and/or higher income they need, not more debt even at lower rates. We perhaps need to think about how the Christian concept of forgiveness can be brought into the way we deal with people who have got into financial difficulty.
The other side of debt
But what about the other side of debt? What about the people with plenty of money?
Jesus’ parable about the rich fool (Luke 12:13-21) describes someone with more wealth than they know what to do with:
“The ground of a certain rich man yielded a good harvest. He thought….what shall I do? I have no place to store my crops. I will tear down my barns and build bigger ones, and there I will store my surplus”.
Judith comments that if we replace “crops” with “money”, maybe the modern equivalent is opening a new bank account because the first one is full to the limit, or buying shares or bonds on top of the money stored for a rainy day. Jesus is not necessarily saying “don’t save”: the story of Joseph (Genesis 41), for example, reminds us that we need to put some by in the years of feast, to be ready for the time of famine—if we’re made redundant, for example, or to provide for ourselves when we are too old to work. But the story of the rich fool tells us there is no point in storing up more than we need for that rainy day. For God says to him,
“You fool! This very night your soul will be demanded of you, and who will have then what you have prepared for yourself?”
You can’t take it with you. Better to spend it on something productive, perhaps by supporting local businesses or funding projects that benefit people in developing countries.
But far worse than sitting on barns full of unproductive riches is lending them out at high interest rates to people who are desperate. And far too many of us want to do exactly that. We have come to expect to live on the interest from our savings, rather than on those savings themselves, so we want to receive a good rate of return on our savings and investments. That works in the good times, if the money is lent to enterprises that use it to create economic growth. But in the bad times, when the economy is not growing, living on the interest from savings can only be done by extracting money from other people, many of whom are too poor to save, through cutting their wages, reducing their benefits, raising their taxes, eliminating their jobs. How is this compatible with Jesus’ teachings? Savings are designed to be used productively. If they can’t be used productively by others—which is what very low interest rates indicate—use them productively yourself. Spend them, or give them away.
A tough challenge
The Archbishop of Canterbury urges us to act as Christ would do. But do we know what Christ would do, faced with a society weighed down with unprecedented amounts of debt? After all, in Jesus’s society, debts were wiped out every fifty years. Perhaps we, too, need debts to be wiped out. But of course that means that those who lent that money will lose it. And we really do like to hang on to our wealth.
Yet Christ had nothing (Luke 9:58), and he sent his followers out with nothing (Matthew 10). If we are to act as he did, we perhaps need to “sell all we have and give to the poor, and come, follow Him” (Mark 10:17-23).



15 comments:

  1. Excellent piece. Though I find it surprising that so many well-informed articles (such as this) discussing money and debt in a Christian / Biblical context, almost universally fail to address the key topic of usury, and, Jesus' chasing the money-lenders out of the Temple with a whip. The parallels to today, where society once again has little / no choice but to deal with the government-sanctioned money-lenders / financial "intermediaries", are well worth serious consideration.

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  2. Curious piece, missing large areas of morality.

    Debt is a lot about one's attitude to risk and ability to manage it. It makes sense to be stern with people who borrow too much, to deter excessive borrowing and stupid risk-taking.

    Lenders have reasonable rights and expectations too: borrowers are benefiting from assets they have not earned

    I have taken out a higher than necessary fixed rate mortgage precisely to avoid the prospect of higher interest rates later. Should I also have to subsidise people who gambled on another outcome? They will have had years of 'unearned' gain before interest rates go up. Then they should take the hit. That's how markets work and keep us all honest

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    1. You will not find anywhere in Jesus' teachings a refusal to forgive people who got into debt because they did things that you don't approve of. Your notion of "morality" requires you to be "judging others", which Jesus specifically says you should not be doing:

      "Do not judge, and you will not be judged. Do not condemn, and you will not be condemned. Forgive, and you will be forgiven." Luke 6:37

      Everyone does things of which others don't approve - including you:

      "Why do you look at the speck of sawdust in your brother's eye and pay no attention to the plank in your own eye?" Luke 6:41

      I find it interesting that the people who condemn "excessive borrowing" are those who have been fortunate enough not to suffer the job losses, sickness or disasters that cause income crashes and make debts unpayable. Perhaps you could be grateful that you have been spared such misfortune, and be generous towards those less fortunate than you.

      It's not just Jesus, either. Here's St. Paul:

      "Therefore let us stop passing judgment on one another. Instead, make up your mind not to put any stumbling block or obstacle in the way of a brother or sister." Romans 14:13

      And of course forgiving debt - the jubilee- is an Old Testament concept, built into Jewish law.

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  3. I suspect we are talking about different things.

    If I lend someone some money, I am not 'judging' that person by expecting that the promise to repay will be upheld, and indeed insisting that it should be. A society based on blandly forgiving anyone who fails to keep a promise for any reason won't flourish. Yes, human weakness exists. But it's better to start from the premise that people are strong enough to have basic self-respect and can make and keep promises. Otherwise what is being 'forgiven'?

    The Prodigal Son parable? It's not clear what happens to the wastrel after he returns to the family fold. Yes he is received generously by his father, but there is also a strong element of the son's repentance for failing to use his wealth honourably.

    Your piece above seems to me to be oddly 'static', taking rich and poor as in effect fixed categories and having nothing to say about the compounding beneficial and moral effects over time of mutual obligation.

    People (and indeed whole communities and countries such as Greece) maybe sometimes need to learn the hard way that it is not sustainable to live off the generosity of others.

    Every Greek I know gloomily accepts that the country was utterly mismanaged for decades. That has consequences - much of the Greeks' 'unearned' wealth is now collapsing. Very tough for them for a while, but surely a good thing in the greater scheme of things?

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    1. I may look at the question of repentance in another post. This post is concerned with the unconditional nature of Christian forgiveness. It seems to me that your values attach conditionality to forgiveness. That is not Christian.

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    2. Perhaps not. But if you order a book from Amazon and they take your money but don't send the book, you might feel spiritually dissatisfied if they asked you to forgive them but did nothing else about their failure to honour their promise.

      There is something passive and fatalistic if not immoral about 'unconditional forgiveness' divorced from any idea of responsibility and human reciprocity. Your post itself acknowledges the core idea of reciprocity and mutual obligation:

      "Jesus took the burden of our debt upon himself out of love, and in so doing freed us from any obligation except to love him in return. That is how the slavery of sin becomes the freedom of love."

      Why should I be under an obligation (sic) to Jesus or anyone else that I have not freely negotiated and accepted? Contrariwise, if I have negotiated and accepted an obligation I thereby accept the responsibility of living up to it and the consequences of not doing so.

      Interesting (and Big) stuff. Thanks for engaging.

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  4. Thanks for writing this, Frances. There is something personal and intimate about money that economic analysis just doesn't touch. Getting to the truth of money requires us to reveal ourselves.

    I'm not a Christian, but I'm really interested in the relationships you've written about here. And especially the idea of unconditional (or pure) forgiveness.

    Before Constantine, as you say, justice was achieved through the forgiveness of debt in the form of jubilees. After Constantine, the idea of justice and forgiveness seem to conflate into the idea of charity, and debt which (as some folks such as Graeber might claim) is 'reborn' (not quite the right word) as money. When writing about it in the past I found this essay from a Catholic theologian on justice & charity http://justicebeforecharity.org/home.php which (for me) puts charity in its correct place.

    I do a annual ritual money burning (on 23rd Oct) and I've come to see this as a ritual of 'pure forgiveness'. The question I'm always asked is why I don't give the money to charity?

    I've actually argued against the idea of a modern jubilee. I see things in a (quasi) psychoanalytical framework (so I see charity as a neurosis). I go into in detail towards the end of this (over long & rambling) post. http://jonone100.blogspot.co.uk/2013/05/a-ramble-on-lse-democracy-talk-with.html But briefly, I say I think that a modern jubilee may "fracture the delicate balance of our mental life. It might make us schizophrenic. The dividing line between creditors and debtors would become a vast fissure. Each side would become more entrenched in their own position, more absorbed in their own sense of righteousness."

    Although, funnily enough, I am actually an optimist. I think the issue might be in forgiveness being both secular and sacred. Secular forgiveness (although it may do much good) is by nature instrumental/conditional, whereas sacred forgiveness has the potential at least, to be 'unconditional' (in your words) or 'pure' (in mine).

    I'd look forward to reading more from you.

    Jon

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    1. Interesting that you see forgiveness of debt as "charity". I don't. I see it as justice. The majority of unpayable debts were only incurred in the first place because of injustice - third world debt, for example. And most of the remainder are unpayable because of changes in circumstances that are made worse by social injustice, such as unemployment or sickness. Very, very few debts are deliberately entered into with the intention of default. To me, therefore, forcing service and repayment of unpayable debts at the cost of life, health and freedom is rank injustice. The "just" thing to do is to forgive them.

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    2. I don't see forgiveness of debt as "charity". I said that post-Constantine Christianity conflated the ideas of Justice and the Forgiveness of Debt into Charity. I agree that the way to Justice is through forgiveness.

      But there is a problem here. If you're owed money and you forgive your debtors, that's one thing. A large scale debt jubilee (which would have to be enforced) is quite another. Forced forgiveness is not forgiveness at all, and so not a way to Justice.

      This refers back to the idea that there is something irredeemably personal and intimate about money which no amount of economic analysis can explain. It so often seems to be the axis on which morality turns.

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    3. I wasn't suggesting enforced "forgiveness" which simply replaced one injustice with another. I was calling for a change of attitude on the part of those who have money - metanoia, if you will. Hence my last sentence.

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  5. Frances,

    Interesting post. I too am a committed Christian and appreciate you integrating your faith into your analysis. Keep it up.

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    1. Thanks David. I really appreciate your support.

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  6. Matthew 25:14-30 (English Standard Version)

    Matthew 25:14-30
    English Standard Version (ESV)
    The Parable of the Talents

    14 “For it will be like a man going on a journey, who called his servants[a] and entrusted to them his property. 15 To one he gave five talents,[b] to another two, to another one, to each according to his ability. Then he went away. 16 He who had received the five talents went at once and traded with them, and he made five talents more. 17 So also he who had the two talents made two talents more. 18 But he who had received the one talent went and dug in the ground and hid his master's money. 19 Now after a long time the master of those servants came and settled accounts with them. 20 And he who had received the five talents came forward, bringing five talents more, saying, ‘Master, you delivered to me five talents; here I have made five talents more.’ 21 His master said to him, ‘Well done, good and faithful servant.[c] You have been faithful over a little; I will set you over much. Enter into the joy of your master.’ 22 And he also who had the two talents came forward, saying, ‘Master, you delivered to me two talents; here I have made two talents more.’ 23 His master said to him, ‘Well done, good and faithful servant. You have been faithful over a little; I will set you over much. Enter into the joy of your master.’ 24 He also who had received the one talent came forward, saying, ‘Master, I knew you to be a hard man, reaping where you did not sow, and gathering where you scattered no seed, 25 so I was afraid, and I went and hid your talent in the ground. Here you have what is yours.’ 26 But his master answered him, ‘You wicked and slothful servant! You knew that I reap where I have not sown and gather where I scattered no seed? 27 Then you ought to have invested my money with the bankers, and at my coming I should have received what was my own with interest.

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    1. Heh. I tackled the economics of the Parable of the Talents over at Coppola Comment a long while ago (it's one of my earliest blogposts):

      "By the way, the idea that investing (i.e. spending) to achieve a return is better than saving is hardly new. It's in the Bible - Matthew 24: 14-30 ( even includes a nice plug for banks - odd in a society where lending at usury was illegal!). Christians usually interpret this to mean "talents" in the sense of abilities, which gets them off the hook because "saving" is often regarded as a Christian virtue. But Jesus could simply have been talking economics....."

      Though it was only in passing at the end of the post. Maybe I should have another go at it.

      http://coppolacomment.blogspot.co.uk/2011/03/great-savings-fallacy.html

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