Students in Debt Bondage: The New Face of Neoliberalism

Loyola University, ca. 1966. A freshman studies physics - and doesn't have to be distracted by the prospect of future debt bondage.


Very few people even in high finance areas or on the “Street” are aware of how perversely Neoliberal capitalism has gutted this country from the inside out using debt. This is particularly so for student debt, which has now risen to the hitherto unheard of level of $1.2 trillion.

 Maria Savart, in a speech at a recent convention of the Democratic Socialists of America, pointed out that student debt along with increasing college  tuition costs and stagnant wages “is a direct result of neoliberal capitalism and the financialization of the economy”. She then went on to endorse a system of free higher education as exists in many nations, without which “there is no future for college students,”

 

Her reference to “financialization” may have left some of her young audience mystified but it was very well articulated by Kevin Phillips in his book, Arrogant Capital. What Phillips meant (and Savart too) is the tilting of the entire economy to financial manipulation – whether carried out in the management of debt, stock trades and commissions, or in more aggressive speculation such as credit default swaps. It is known, for example, that the majority of this country’s output now is in terms of financial instruments, not hard production or manufacture.   Phillips noted that the monopolization of finance capital and speculation is typical for empires  in decline – such as the Dutch, after the Tulip crisis, and the British, after military overstretch humbled it. Left unsaid, is how “financialization” is also part of the Neoliberal global market order.

The process of financialization - using the substitution of asset classes for real wage increases or real pensions  was explicated beautifully in a recent salon.com essay:

"Policymakers across the industrialized world set about accomplishing this goal (of degrading global labor and the middle class) by pushing their middle classes to invest their wealth into assets, especially stocks and real estate, then use the levers of public policy to inflate the values of those assets in order to disguise the inevitable declines in wages. There was also a concerted effort to hide wage losses by lowering the prices of non-perishable goods"

Of course, when the asset values collapsed, as they did with the financial meltdown in 2008, the wealthy could reap even bigger gains - marked by the middle classes asset (stock, mutual fund, real estate) losses.

The overall imperative of the global capital market is ultimately to abolish all governmental, national social insurance systems - whether these be Medicare or Social Security in the United States, or the analogous systems in Germany or Barbados. In each case, the particular system to be replaced by a privatized entity able to generate debt and further income inequality.

 

In the U.S. this imperative to dismantle the social contract is now proceeding full steam, with Social Security privatization on the legislators' table in some form, and the private disposal of Medicare, Medicaid, soon to follow. Much of this is being pushed by ideologues in rabid think tanks such as the American Heritage Foundation, CATO Institute and its offshoots.

In the mean time, the debt “edifice” is being constructed, predicated on the belief of the Neoliberal elites that this nation is being transmuted into a nation of  underclass “peasants”  who will lack permanent purchasing power, and hence the only way to extract profit from them is via expanded debt.  Their goal is to initiate this peasant expansion- cum- debt with the current college graduates – via higher interest rates on student loans. The reasoning is simple to a fault:

 With mountains of  college debt looming for future generations, years that ought to have cultivated intellectual exploration and critical thinking will mutate into pure job or career training. Hence, the extent of debt imposed by accepting a typical student loan will ensure students are discouraged from studying in any field that isn’t applied. It also ensures the perception that college is regarded as a private good not a social one.

 

The outcome is that the Neolib virus of individualism is preserved and those issuing with degrees will be much less inclined to question the Neoliberal status quo. They will be so taken up with work hours (to pay off their debts) they won’t have time to reflect on how the elites have screwed them to a far thee well

 Of course, it doesn’t take a genius to see that this degraded, privatized ‘work only’ outcome erodes democracy, which is predicated not only on an educated citizenry (capable of making informed decisions) but one that is prepared to offer criticism of the nation’s leaders and policies when and where appropriate.

 

Currently, the Neoliberal “Debt box” can be likened to four walls of a debt prison (as DSA leaders have portrayed it as well as ‘Strike Debt’ an offshoot of Occupy Wall Street). The four walls symbolize: student college debt, medical debt – from medical bills, housing debt – from underwater mortgages as well as those that eat up too much of income, and credit card debt – used by millions to pay for necessities because their incomes aren’t large enough to meet their bills. (And the cheap skate Repukes use fictitious paper “filibusters” to prevent raising the minimum wage).

 

The effect of the ‘Debt box’ is as follows:

i)                Everyone within it, whether student or medically beleaguered citizen, is saddled with debt to the point of being in debt bondage.

ii)               Debt bondage means one is essentially working indefinitely for one’s creditor

iii)             Though indentured servitude was outlawed by the 13^th amendment, today’s students are the new indentured servants.

 

Let us consider points (ii) and (iii) and why today’s college grads are the new indentured servants. The reasons are as follows:

 

1)     While public student loans can be forgiven on death (if there is no money in the estate to pay them) private, unsecured student loans can’t be abolished even after the grad’s death. Hence, his or her parents’ estate will be challenged to pay it off, including possibly repossessing their home or other property.

2)     Bankruptcy does not discharge either private or public student debt.

3)     Like the indentured servants of colonial times, many young Americans will be legally bound to assume the student debts of their parents if their parents estates do not leave enough to pay them off.

Compounding all of this is the massive credit card debt which nearly equals the student debt. This arises directly from the fact that half of the country lives beyond it means and averages more than $10,000 in debt liability per person. Not surprising given how the minimum wage hasn’t been increased to match today’s higher expense (in food, fuel) as well as home-rent costs.

 

All of this plays directly into the neoliberal capitalist’s hands. It ensures Neoliberalism will continue apace as the population mainly keeps quiet (it can get cheap goods from Walmart, after all)  and puts its collective  nose to grindstone to pay off its debts, and hence won’t do any reckless acts – say like those in the Ukraine right now,

How powerful is the Neoliberal Imperative? One need only look back to see how  (in 2006), financial institutions fought for and won the Orwellian –named “Postal Pension Reform Act of 2006”  that artificially bankrupted the U.S. Post Office by requiring prepayment of pensions for 75 years into the future!

 

If they would go to this extent to suck the life out of Uncle Sam (even demanding the sale of USPS buildings) , do you really think these vampires would have any mercy on you, with $30,000 in student loan debt?

Henry Giroux's blog on 'Protesting Youth in an Age of Neoliberal Savagery'  has it exactly right:

"As the latest stage of predatory capitalism, neoliberalism is part of a broader economic and political project of restoring class power and consolidating the rapid concentration of capital, particularly financial capital (Giroux 2008; 2014). As a political project, it includes “the deregulation of finance, privatization of public services, elimination and curtailment of social welfare programs, open attacks on unions, and routine violations of labor laws” (Yates 2013). As an ideology, it casts all dimensions of life in terms of market rationality, construes profit-making as the arbiter and essence of democracy, consuming as the only operable form of citizenship, and upholds the irrational belief that the market can both solve all problems and serve as a model for structuring all social relations. As a mode of governance, it produces identities, subjects, and ways of life driven by a survival-of-the fittest ethic, grounded in the idea of the free, possessive individual, and committed to the right of ruling groups and institutions to exercise power removed from matters of ethics and social costs...."

Sadly, we live in a predatory  Neoliberal “creditocracy” in which the money lenders (via their lobbyists) possess the power to bring any public service or function under their yoke. They will not be satisfied until the entire planet is converted into serfs for the Neoliberal debt minders.

You paying attention, Ukrainians, all pining to join the EU and NATO? Now may be the time to get your "asset allocations" in order before those pensions and wages are cut!