The Key to a Sustainable Economy Is 5,000 Years Old

By Ellen Brown

Source: Truthdig

We are again reaching the point in the business cycle known as “peak debt,” when debts have compounded to the point that their cumulative total cannot be paid. Student debt, credit card debt, auto loans, business debt and sovereign debt are all higher than they have ever been. As economist Michael Hudson writes in his provocative 2018 book, “…and forgive them their debts,” debts that can’t be paid won’t be paid. The question, he says, is how they won’t be paid.

Mainstream economic models leave this problem to “the invisible hand of the market,” assuming trends will self-correct over time. But while the market may indeed correct, it does so at the expense of the debtors, who become progressively poorer as the rich become richer. Borrowers go bankrupt and banks foreclose on the collateral, dispossessing the debtors of their homes and their livelihoods. The houses are bought by the rich at distress prices and are rented back at inflated prices to the debtors, who are then forced into wage peonage to survive. When the banks themselves go bankrupt, the government bails them out. Thus the market corrects, but not without government intervention. That intervention just comes at the end of the cycle to rescue the creditors, whose ability to buy politicians gives them the upper hand. According to free-market apologists, this is a natural cycle akin to the weather, which dates all the way back to the birth of modern economics in ancient Greece and Rome.

Hudson counters that those classical societies are not actually where our financial system began, and that capitalism did not evolve from bartering, as its ideologues assert. Rather, it devolved from a more functional, sophisticated, egalitarian credit system that was sustained for two millennia in ancient Mesopotamia (now parts of Iraq, Turkey, Kuwait and Iran). Money, banking, accounting and modern business enterprise originated not with gold and private trade, but in the public sector of Sumer’s palaces and temples in the third century B.C. Because it involved credit issued by the local government rather than private loans of gold, bad debts could be periodically forgiven rather than compounding until they took the whole system down, a critical feature that allowed for its remarkable longevity.

The True Roots of Money and Banking

Sumer was the first civilization for which we have written records. Its notable achievements included the wheel, the lunar calendar, our numerical system, law codes, an organized hierarchy of priest-kings, copper tools and weapons, irrigation, accounting and money. It also produced the first written language, which took the form of cuneiform figures impressed on clay. These tablets were largely just accounting tools, recording the flow of food and raw materials in the temple and palace workshops, as well as IOUs (mainly to these large public institutions) that had to be preserved in writing to be enforced. This temple accounting system allowed for the coordinated flow of credit to peasant farmers from planting to harvesting, and for advances to merchants to engage in foreign trade.

In fact, it was the need to manage accounts for a large labor force under bureaucratic control that is thought to have led to the development of writing. The people willingly accepted this bureaucratic control because they viewed the gods as having decreed it. According to their cuneiform writings, humans were genetically engineered to work the fields and the mines after certain lower gods tasked with that hard labor rebelled.

Usury, or the charging of interest on loans, was an accepted part of the Mesopotamian credit system. Interest rates were high and remained unchanged for two millennia. But Mesopotamian scholars were well aware of the problem of “debts that can’t be paid.” Unlike in today’s academic economic curriculum, Hudson writes:

Babylonian scribal students were trained already c. 2000 BC in the mathematics of compound interest. Their school exercises asked them to calculate how long it took a debt at interest of 1/60th per month to double. The answer is 60 months: five years. How long to quadruple? 10 years. How long to multiply 64 times? 30 years. It must’ve been obvious that no economy can grow in keeping with this rate of increase.

Sumerian kings solved the problem of “peak debt” by periodically declaring “clean slates,” in which agrarian debts were forgiven and debtors were released from servitude to work as tenants on their own plots of land. The land belonged to the gods under the stewardship of the temple and the palace and could not be sold, but farmers and their families maintained leaseholds to it in perpetuity by providing a share of their crops, service in the military and labor in building communal infrastructure. In this way, their homes and livelihoods were preserved, an arrangement that was mutually beneficial, since the kings needed their service.

Jewish scribes, who spent time in captivity in Babylon in the sixth century B.C, adapted these laws in the year or jubilee, which Hudson argues was added to Leviticus after the Babylonian captivity. According to Leviticus 25:8-13, a Jubilee Year was to be declared every 49 years, during which debts would be forgiven, slaves and prisoners freed and their property leaseholds restored. As in ancient Mesopotamia, property ownership remained with Yahweh and his earthly proxies. The Jubilee law effectively banned the outright sale of land, which could only be leased for up to 50 years (Leviticus 25:14-17). The Levitican Jubilee represented an advance over the Mesopotamian “clean slates,” Hudson says, in that it was codified into law rather than relying on the whim of the king. But its proclaimers lacked political power, and whether the law was ever enforced is unclear. It served as a moral rather than a legal prescription.

Ancient Greece and Rome adopted the Mesopotamian system of lending at interest, but without the safety valve of periodic “clean slates,” since the creditors were no longer the king or the temple, but private lenders. Unfettered usury resulted in debt bondage and forfeiture of properties, consolidation into large landholdings, a growing wedge between rich and poor, and the ultimate destruction of the Roman Empire.

As for the celebrated development of property rights and democracy in ancient Greece and Rome, Hudson argues that they did not actually serve the poor. They served the rich, who controlled elections, just as rich donors do today. Taking power away from local governments by privatizing once-communal lands allowed private creditors to pass laws by which they could legally confiscate property when their debtors could not pay. “Free markets” meant the freedom to accumulate massive wealth at the expense of the poor and the state.

Hudson maintains that when Jesus Christ preached “forgiveness of debts,” he was also talking about economic debt, not just moral transgressions. When he overturned the tables of the money changers, it was because they had turned a house of prayer into “a den of thieves.” But creditors’ rights had by then gained legal dominance, and Christian theologians lacked the power to override them. Rather than being a promise of economic redemption in this life, forgiveness of debts thus became a promise of spiritual redemption in the next.

How to Pull Off a Modern Debt Jubilee

Such has been the fate of debtors in modern Western economies. But in some modern non-Western economies, vestiges of the debt write-off solution remain. In China, for instance, nonperforming loans are often carried on the books of state-owned banks or canceled rather than putting insolvent debtors and banks into bankruptcy. As Dinny McMahon wrote in June in an article titled “China’s Bad Data Can Be a Good Thing”:

In China, the state stands behind the country’s banks. As long as authorities ensure those banks have sufficient liquidity to meet their obligations, they can trundle along with higher delinquency levels than would be regarded safe in a market economy.

China’s banking system, like that of ancient Mesopotamia, is largely in the public sector, so the state can back its banks with liquidity as needed. Interestingly, the Chinese state also preserves the ancient Near Eastern practice of retaining ownership of the land, which citizens can only lease for a period of time.

In Western economies, most banks are privately owned and heavily regulated, with high reserve and capital requirements. Bad loans mean debtors are put into foreclosure, jobs and capital infrastructure are lost, and austerity prevails. The Trump administration is now aggressively pursuing a trade war with China in an effort to level the playing field by forcing it into the same austerity regime, but a more productive and sustainable approach might be for the U.S. to engage in periodic debt jubilees itself.

The problem with that solution today is that most debts in Western economies are owed not to the government but to private creditors, who will insist on their contractual rights to payment. We need to find a way to pay the creditors while relieving the borrowers of their debt burden.

One possibility is to nationalize insolvent banks and sell their bad loans to the central bank, which can buy them with money created on its books. The loans can then be written down or voided out. Precedent for this policy was established with “QE1,” the Fed’s first round of quantitative easing, in which it bought unmarketable mortgage-backed securities from banks with liquidity problems.

Another possibility would be to use money generated by the central bank to bail out debtors directly. This could be done selectively, by buying up student debt or credit card debt or car loans bundled as “asset-backed securities,” then writing the debts down or off, for example. Alternatively, debts could be relieved collectively with a periodic national dividend or universal basic income paid to everyone, again drawn from the deep pocket of the central bank.

Critics will object that this would dangerously inflate the money supply and consumer prices, but that need not be the case. Today, virtually all money is created as bank debt, and it is extinguished when the debt is repaid. That means dividends used to pay this debt down would be extinguished, along with the debt itself, without adding to the money supply. For the 80% of the U.S. population now carrying debt, loan repayments from their national dividends could be made mandatory and automatic. The remaining 20% would be likely to save or invest the funds, so this money too would contribute little to consumer price inflation; and to the extent that it did go into the consumer market, it could help generate the demand needed to stimulate productivity and employment. (For a fuller explanation, see Ellen Brown, “Banking on the People,” 2019).

In ancient Mesopotamia, writing off debts worked brilliantly well for two millennia. As Hudson concludes:

To insist that all debts must be paid ignores the contrast between the thousands of years of successful Near Eastern clean slates and the debt bondage into which [Greco-Roman] antiquity sank. … If this policy in many cases was more successful than today’s, it is because they recognized that insisting that all debts must be paid meant foreclosures, economic polarization and impoverishment of the economy at large.

‘Deaths of despair’ soaring among Gen Z & millennials: ‘It’s the economy, stupid’

By Helen Buyniski

Source: RT.com

Young Americans are killing themselves in record numbers, the victims of a confluence of economic and sociological factors that have singled them out – even above a nationwide surge in so-called “deaths of despair.”

Suicide rates among teens and young adults aged 15 to 24 – the older end of “Generation Z” – spiked in 2017, reaching their highest point since 2000, according to a study published Tuesday in the Journal of the American Medical Association (JAMA). They’ve risen 51 percent in the past 10 years, buoyed by rising rates of anxiety and depression along with social media and drug use, and the figures may be even higher, since some intentional overdoses are not counted as suicides.

Young men saw the steepest rise in deaths, according to the JAMA study, though women are catching up to them at an alarming pace. Teens and young adults report higher rates of anxiety and depression than previous generations, and multiple studies in recent years have shown that social media use exacerbates both conditions, creating a self-perpetuating feedback loop that can have tragic consequences.

But Generation Z is simply following in the footsteps of its predecessors. The much-maligned millennial generation, defined by the Census Bureau as those born between 1982 and 2000 (meaning some are included in the JAMA study), are also killing themselves in record numbers. Drug-related deaths among ages 18 to 34 have increased 108 percent since 2007, while alcohol-related deaths are up 69 percent and suicides are up 35 percent, according to a report published last week by Trust for America’s Health. While millennials have long been written off as entitled, spoiled snowflakes, the media and society are belatedly realizing that they aren’t just layabouts unmotivated to exit their parents’ basement – this “despair” has a cause, and it’s primarily economic.

The rise of millennial and Gen Z “deaths of despair” can be traced to the yawning gap between reality and expectations. Raised on the myths of the American Dream, these are the first Americans to experience a markedly lower standard of living than their parents, the Baby Boomers who grew prosperous on the fruits of the postwar economic boom. The national debt has ballooned, driven by two decades of an unwinnable war whose cost is poised to top $6 trillion, and the Pentagon’s budget has swollen to an unprecedented size even as cuts to social services have decimated what little social safety net Americans could once count on. Multiple rounds of tax cuts for the wealthy and corporations destroyed the government’s revenue base, and perhaps unsurprisingly, economic inequality has grown to exceed even the rates seen during the Great Depression.

And even these concerns are beside the point for a generation that left college already shackled with student loan debt that can run into the hundreds of thousands of dollars and cannot be canceled even by declaring bankruptcy. Millennials who graduated in the aftermath of the 2008 crash entered the “real world” to find no jobs waiting for them. Lucky if they could find an unpaid internship or a waitressing gig, they were forced to retreat back into their parents’ basements, a crushing blow for anyone but particularly for a generation told since birth that they were special, that they could do anything they wanted, that the world was their oyster.

The US, perhaps uniquely in the developed world, views poverty as a sin, and many millennials suffer in silence, believing they are the only ones in their peer group to “flunk out” of the “real world.” Instead of finding support from friends and family, they take advantage of the ready availability of alcohol and opioids, a factor that has caused the number of “deaths of despair” to skyrocket. Some economically-depressed states, like West Virginia, have seen drug overdoses increase more than fivefold in the last 12 years, according to a report published earlier this month by the Commonwealth Fund, and many more have seen their number double and triple. That pharmaceutical companies flooded the market with opioids at the same time the rise of social media devastated the quality and complexity of human relationships is a particularly deadly coincidence.

Since 1996, the average net worth of “consumers” under 35 has declined 35 percent, according to management consultancy Deloitte. Advertisers are starting to realize that targeting this group, while it may seem like a savvy marketing decision – they constitute a quarter of the US population, after all – doesn’t make sense, since they can’t afford to buy anything. Student debt is up 160 percent since 2004 for the under-30 population, and the home-ownership rate for millennials is only 37 percent – fully eight percentage points lower than their parents. Fully 89 percent would like to own a home, according to a survey conducted last year, but nearly half have zero dollars in savings – let alone the 20 percent most mortgages require for a down payment.

Young people aren’t the only ones afflicted by the “deaths of despair” phenomenon. Life expectancy nationwide is down for the third year in a row, and a report from Trust for America’s Health published last year projects that this “epidemic” – which they define as drug and alcohol deaths plus suicide – is on track to kill more than 1.6 million people by 2025 if it continues to grow at its current rate. As the Baby Boomers start to retire only to find they cannot live on their meager savings – assuming they still have any – they, too, are killing themselves more often, with suicide rates up 40 percent from 2007 to 2015.

This is not only a young people’s problem, nor is it an easy one to solve, but acknowledging the systemic poverty afflicting the “richest country in the world” – where two-thirds of the population doesn’t have enough saved to cover a $500 crisis – is a good place to start.

Conjuring Up the Next Depression

By Chris Hedges

Source: TruthDig

During the financial crisis of 2008, the world’s central banks, including the Federal Reserve, injected trillions of dollars of fabricated money into the global financial system. This fabricated money has created a worldwide debt of $325 trillion, more than three times global GDP. The fabricated money was hoarded by banks and corporations, loaned by banks at predatory interest rates, used to service interest on unpayable debt or spent buying back stock, providing millions in compensation for elites. The fabricated money was not invested in the real economy. Products were not manufactured and sold. Workers were not reinstated into the middle class with sustainable incomes, benefits and pensions. Infrastructure projects were not undertaken. The fabricated money reinflated massive financial bubbles built on debt and papered over a fatally diseased financial system destined for collapse.

What will trigger the next crash? The $13.2 trillion in unsustainable U.S. household debt? The $1.5 trillion in unsustainable student debt? The billions Wall Street has invested in a fracking industry that has spent $280 billion more than it generated from its operations? Who knows. What is certain is that a global financial crash, one that will dwarf the meltdown of 2008, is inevitable. And this time, with interest rates near zero, the elites have no escape plan. The financial structure will disintegrate. The global economy will go into a death spiral. The rage of a betrayed and impoverished population will, I fear, further empower right-wing demagogues who promise vengeance on the global elites, moral renewal, a nativist revival heralding a return to a mythical golden age when immigrants, women and people of color knew their place, and a Christianized fascism.

The 2008 financial crisis, as the economist Nomi Prins points out, “converted central banks into a new class of power brokers.” They looted national treasuries and amassed trillions in wealth to become politically and economically omnipotent. In her book “Collusion: How Central Bankers Rigged the World,” she writes that central bankers and the world’s largest financial institutions fraudulently manipulate global markets and use fabricated, or as she writes, “fake money,” to inflate asset bubbles for short-term profit as they drive us toward “a dangerous financial precipice.”

“Before the crisis, they were just asleep at the wheel, in particular, the Federal Reserve of the United States, which is supposed to be the main regulator of the major banks in the United States,” Prins said when we met in New York. “It did a horrible job of doing that, which is why we had the financial crisis. It became a deregulator instead of a regulator. In the wake of the financial crisis, the solution to fixing the crisis and saving the economy from a great depression or recession, whatever the terminology that was used at any given time, was to fabricate trillions and trillions of dollars out of an electronic ether.”

The Federal Reserve handed over an estimated $29 trillion of this fabricated money to American banks, according to researchers at the University of MissouriTwenty-nine trillion dollars! We could have provided free college tuition to every student or universal health care, repaired our crumbling infrastructure, transitioned to clean energy, forgiven student debt, raised wages, bailed out underwater homeowners, formed public banks to invest at low interest rates in our communities, provided a guaranteed minimum income for everyone and organized a massive jobs program for the unemployed and underemployed. Sixteen million children would not go to bed hungry. The mentally ill and the homeless—an estimated 553,742 Americans are homeless every night—would not be left on the streets or locked away in our prisons. The economy would revive. Instead, $29 trillion in fabricated money was handed to financial gangsters who are about to make most of it evaporate and plunge us into a depression that will rival that of the global crash of 1929.

Kevin Zeese and Margaret Flowers write on the website Popular Resistance, “One-sixth of this could provide a $12,000 annual basic income, which would cost $3.8 trillion annually, doubling Social Security payments to $22,000 annually, which would cost $662 billion, a $10,000 bonus for all U.S. public school teachers, which would cost $11 billion, free college for all high school graduates, which would cost $318 billion, and universal preschool, which would cost $38 billion. National improved Medicare for all would actually save the nation trillions of dollars over a decade.”

An emergency clause in the Federal Reserve Act of 1913 allows the Fed to provide liquidity to a distressed banking system. But the Federal Reserve did not stop with the creation of a few hundred billion dollars. It flooded the financial markets with absurd levels of fabricated money. This had the effect of making the economy appear as if it had revived. And for the oligarchs, who had access to this fabricated money while we did not, it did.

The Fed cut interest rates to near zero. Some central banks in Europe instituted negative interest rates, meaning they would pay borrowers to take loans. The Fed, in a clever bit of accounting, even permitted distressed banks to use these no-interest loans to buy U.S. Treasury bonds. The banks gave the bonds back to the Fed and received a quarter of a percent of interest from the Fed. In short, the banks were loaned money at virtually no interest by the Fed and then were paid interest by the Fed on the money they borrowed. The Fed also bought up worthless mortgage assets and other toxic assets from the banks. Since Fed authorities could fabricate as much money as they wanted, it did not matter how they spent it.

“It’s like going to someone’s old garage sale and saying, ‘I want that bicycle with no wheels. I’ll pay you 100 grand for it. Why? Because it’s not my money,’ ” Prins said.

“These people have rigged the system,” she said of the bankers. “There is money fabricated at the top. It is used to pump up financial assets, including stock. It has to come from somewhere. Because money is cheap there’s more borrowing at the corporate level. There’s more money borrowed at the government level.”

“Where do you go to repay it?” she asked. “You go into the nation. You go into the economy. You extract money from the foundational economy, from social programs. You impose austerity.”

Given the staggering amount of fabricated money that has to be repaid, the banks need to build greater and greater pools of debt. This is why when you are late in paying your credit card the interest rate jumps to 28 percent. This is why if you declare bankruptcy you are still responsible for paying off your student loan, even as 1 million people a year default on student loans, with 40 percent of all borrowers expected to default on student loans by 2023. This is why wages are stagnant or have declined while costs, from health care and pharmaceutical products to bank fees and basic utilities, are skyrocketing. The enforced debt peonage grows to feed the beast until, as with the subprime mortgage crisis, the predatory system fails because of massive defaults. There will come a day, for example, as with all financial bubbles, when the wildly optimistic projected profits of industries such as fracking will no longer be an effective excuse to keep pumping money into failing businesses burdened by debt they cannot repay.

“The 60 biggest exploration and production firms are not generating enough cash from their operations to cover their operating and capital expenses,” Bethany McLean writes of the fracking industry in an articletitled “The Next Financial Crisis Lurks Underground” that appeared in The New York Times. “In aggregate, from mid-2012 to mid-2017, they had negative free cash flow of $9 billion per quarter.”

The global financial system is a ticking time bomb. The question is not if it will explode but when it will explode. And once it does, the inability of the global speculators to use fabricated money with zero interest to paper over the debacle will trigger massive unemployment, high prices for imports and basic services, and a devaluation in which the dollar will become nearly worthless as it is abandoned as the world’s reserve currency. This manufactured financial tsunami will transform the United States, already a failed democracy, into an authoritarian police state. Life will become very cheap, especially for the vulnerable—undocumented workers, Muslims, poor people of color, girls and women, anti-capitalist and anti-imperialist critics branded as agents of  foreign powers—who will be demonized and persecuted for the collapse. The elites, in a desperate bid to cling to their unchecked power and obscene wealth, will disembowel what is left of the United States.

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

Dr. Nicholas Partyka

Source: The Hampton Institute

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.

The Poverty Machine: Student Debt, Class Society, and Securing Bonded Labor

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By Jeremy Brunger

Source: The Hampton Institute

At the dawn of the 20th century, very few American students attended high school, as the demands of the heavy-industrial and the agricultural economies of that period were ill-suited to an extended education beyond the family sphere. In the middle of the 20th century, most Americans who either aspired to or had to work entered the full-time workforce immediately after high school, for such a postwar economy featured plenty of growth and comparably fair wage-compensation for the average worker. As the economy became more complex in its labor needs, its extending length of education complemented these requirements. The transformation of the agricultural economy into the technological economy after World War II, in turn, transformed the university, once the commune of the well-to-do, into a center for job training, an adjunct to industry, and one which continued to increase in enrollment as the technological necessities of an increasingly complex economy required further education. What was once the realm of the study of Christian religion, the Rennaissance humanists, and the Aufklärung became, for most students, the study of the technical labor necessary to produce and reproduce the new forms of capitalism and scientific production coming into existence. The growth of the American middle class became co-incident with the growth of the education industries which had hardly existed a century previous, when the middle class itself had hardly existed in any recognizable form. Where there was study, there was hope for economic success-the maxim “if a man falls in a field he is redeemed in a library” comes to mind-and the institution of the university became as integral to living well in the United States as the ownership of property and the propagation of the nuclear family.

However, in the 21st century, although attendance of university courses is at an all-time high as the millennial generation achieves the highest historical rate on record of college attendance, that same generation is forecast to experience a decline in standards of living comparative to their forebears. Not only this qualitative fact, but also the quantitative method of that attendance is worthy of critical analysis-for the funding of undergraduate and graduate educations comes largely from the borrowing of money from lenders with the Federal government playing its role as intermediary. As the declining middle class cannot pay for its children’s higher educations, it looks to the loan system to cover the ever-increasing costs of reproducing its standards of living over time. But such loans cannot be discharged in bankruptcy, and with the already saturated labor markets of the majority of the professions that could hope to pay off those loans, the economic situation comes to look much different: rather than the state intent on spreading enlightenment to the masses, the state appears to be securitizing a labor force that will simply have to perform whatever jobs are available, perhaps for decades on end, in order to pay off those loans.

That is, the students will have to do so if they want to qualify for home mortgages and otherwise live free from debt, which historically has always loomed over the subaltern and the serf alike. The parallels between the indebted student and the historical bond-laborer are strong enough to warrant comparison. One trend that especially deserves critical analysis is the outreach of the market to cover students from low-income backgrounds and whether or not such outreach is democratic-a Rawlsian lifting of the boats-or if it is merely predatory in nature and outcome. For, if the state and its lenders are merely financing higher education in order to secure a labor force that will not practice in the professions for which it trained but rather any job available by fiat of the debt-load, then a new reckoning is due of the state of affairs between the working-class young and their educations, the relationship between the state and the private sector, and the ongoing presence of class determinism in the free world.
Debt Corvee

According to The Institute for College Access and Success, statistics for the average student debt load from 2014 suggest that 71% of all students graduating from four-year colleges had student loan debt and the average level of this debt for public colleges was about $25,550, about $5000 higher than 2008. At the for-profit colleges the level was even higher, with students graduating with about $40,000 in debt. Most of this debt is mediated by government loan programs-about 80%-with the rest being covered by private lenders without mediation. The average student debt has increased, since 1993, about three-fold; given the rising cost of living and institutional funding in general, an increase in cost is not particularly surprising. What is surprising is how steep that increase in cost is. The cost of the aspirant apparatus of education increases beyond the market value of the professions on offer when viewed sociologically-the combination of public funding and private ambition allows tuition rates to soar even as student returns on investment plummet.

It appears the days when middle-class parents, a status declining in real terms since the 1970’s, directly financed their children’s college educations are largely over. While this may appear to be beneficial to the working class, in that the gatekeeping apparatus for entry into the professions-the colleges and universities-are more easily accessible than ever before, the debt that falls on the students is that much more of a burden. Students “who received Pell Grants, most of whom had family incomes under $40,000, were much more likely to borrow and to borrow more” than their more middle class peers, according to the Institute for College Access and Success. The debt load is thus geared to the children of the working class and the working poor who, no doubt seeking a better future for themselves, expend large sums of money-often more than a year’s wages, and sometimes two years’ worth-in accessing the portals of higher education. Given that student loans mediated by the government cannot be discharged in bankruptcy, students often have no choice but to live with that debt load for years and years if not forever: they have an education which cannot be repossessed, but they are also forced to work in professions for which they did not train in order to pay off that initial investment. This situation comes to resemble the historical institution of corvee labor, or other forms of debt-labor, in that the young, in being promised a better future, must nevertheless work for others as bonded servants in order to pay off their contracts. This is especially true for graduates in the non-scientific disciplines, as a Bachelor’s degree in a field other than business or the sciences becomes a mere shibboleth for entry into work that is not at the very bottom of the labor market, and even those “safe degrees” harbor little real safety for the student at the whim of capital. Having a Master’s degree in economics, the social science that ended The Great Depression, is yet no guarantee against waiting tables for tips for an indefinite period. The same can be said of the other disciplines.

The historical practice of corvee labor has much in common with the emergence of the indebted student. Corvee was a form of near-slavery, often linked to the military, that indentured laborers to a contract with an owner; nominally, the contract was entered into freely by the laborer, was guaranteed by the state, and was therefore not legally slavery, but due to the conditions of existence the laborer otherwise faced, the contract’s foundations were more reminiscent of the Hobbesian outlook than the Lockean. It was often the only viable option available for the children of the poor, and so, faced with hunger or hard labor, they chose labor on contract with the state. The structural difference between this practice and the practice of loaning to students are small, in that the state was involved in corvee as much as it is involved in student lending-for the student who may seek jobs after graduation is still in the economic red even as the student receives compensation for work. Corvee’s goals were to fill up a floating labor pool; the side effect, whether designed or accidental, of student lending winds up much the same. A student who accrued $30,000 in debt studying philosophy is likely to wind up working in the lower sectors of the labor market, unless they go back to school for a different or a higher degree-and so, in terms of base economics, their impersonal labor has been securitized by the public sector in favor of the private sector. Unless, that is, that student winds up working for the state in some other capacity than what they expected when they entered into their field of study, in which case the state has merely financed its own labor pool: and plenty of state jobs, like those in the sector of public secondary education, offer debt-manumission in reward for practicing in those fields for a period of several years. As such, the claim that only for-profit colleges are to blame for high student debt is false, for public universities contribute massively to rates of student debt and possess internal incentives for producing indebted students who might seek to dissolve their debt through public service.

The same may be said to apply to a pre-medical student who decides it is not prudent to enter into the “megaloans” required for medical school-at which point that student is already indebted for the undergraduate education and so, like the student of philosophy, winds up working for any institution that is hiring. This aleatory materialism may not have been intended by the state-the rhetoric behind opening access to higher education to as many people as possible was couched in democracy and enlightenment, to which every “Dream Big” sign on college campuses will attest-but its practical effects come to much the same result as corvee labor. The ideological state apparatus metamophoses into the financial state apparatus, yet focuses on the same people-the students, who, now indebted, represent a securitized labor force for private and public sectors alike. Most internships available to the graduate are unpaid internships-a relatively new development since the 1990s-thus leaving workng-class graduates desperate for income only non-professional career avenues. As the only broad field of economic growth under the last two presidential terms has occured in the service sector, educated working-class students can expect to enter the same service sectors in which their parents worked. Most interestingly, the etymological root of the word “service” stems from the word “serf.”
The Graeberian Insight

According to Dr. David Graeber’s 2011 book Debt: The First 5000 Years, the centralizing state has employed debt as its apparatus of growth for centuries. Debt, for Graeber, informs the very epistemology of Western people-we think in terms of credit and debit, of libertas and indebtedness, of squaring up our moral accounts. Debt is thus an all-pervasive category in how the Western world works, whether in the ancient world or in the contemporary 21st century. Graeber’s insight is useful beyond his idealist prescriptions for “everyday communism” and his moral philosophy, for the latent commodification of the ideals of democracy-education among them-is still a very real phenomenon. Education may have its necessary infrastructural costs, but it need not be a commodity traded between lenders, or traded between speculators, with unwitting students-especially students from non-professional backgrounds-used as its financial pawns. Given that the actually-existing professions cannot absorb these students, and that the state serves as mediator between lenders financing their educations, the surplus labor which the students provide can only be absorbed by sectors they did not intend on entering: the various service sectors, the only growing sectors in the economy, the only employers broadly willing to accept non-professionals.

Graeber writes that “presented with the prospect of its own eternity, capitalism-or anyway, financial capitalism-simply explodes. Because if there’s no end to it, there’s absolutely no reason not to generate credit-that is, future money-infinitely. Recent events would certainly seem to confirm this. The period leading up to [the financial crisis of] 2008 was one in which many began to believe that capitalism really was going to be around forever; at the very least, no one seemed any longer to be able to imagine an alternative. The immediate effect was a series of increasingly reckless bubbles that brought the whole apparatus crashing down” (360). Given that higher education has become an industry like any other, subject to the same laws of capital and labor, it also suffers the same proneness to instability endemic to any other capitalist endeavor. Consider the recent closure of Sweet Briar College, the glut of PhDs, or the models of infinite growth to which larger universities seem to adhere. The universities are awash in internal commentary that they are swiftly becoming corporatized, going from the internally-administed grove of academe to an organ of capital’s interest-just look at any critical article on The Chronicle of Higher Education, especially those written by educators and researchers already secure in their tenure, such as Terry Eagleton’s 2015 article “The Slow Death of the University.” With such extension of the sphere of capital and its models of development into academia, academia comes to suffer the same risks as capital, along with its students-or, according to the corporatized university, its customers.

The social form of capitalism, in synthesizing Louis Althusser’s social theory of economic reproduction and Graeber’s theory of debt, thus reproduces itself not only through relations of the commodity-form but also through relations of debt (Althusser 47). Capital has a tendency to perform its name-to capitalize, to penetrate into vulnerable markets-and what market is more vulnerable than youth? From ancient Greece to Africa it was not uncustomary for families to lend their children to the market in the form of pawnship or peonage, or in the early modern Western world with indentured servitude, according to the Historical Dictionary of Slavery and Abolition; and with corvee, the state guaranteed the trade-and within the structures of contemporary student lending these kinds of practices appear to have survived into the 21st century even in the liberal West (174, 229-30). The millennial cohort, massive as it is and funded into debt by the state, represents not a boon for the professions but a huge and exploitable labor pool for the industries.
The Re-proletarianization of Youth

In world-systems theory, as understood by the scholar Immanuel Wallerstein in his book Historical Capitalism, the spread of capitalist social relations produces two key processional phenomena: embourgeoisement and proletarianization. These historical processes act in tandem, as some become bourgeois through the labor of those who become proletarianized, and others, more unfortunate, reverse that process. Such a process, now that the university systems have co-opted the capitalist mode of financing, has been enacted in large swathes of the student population. In seeking embourgeoisement and standards of living that have been viable for only a very few for decades, many students actually become proletarianized-and perhaps moreso than had they not attended higher education with the help of the lending system in the first place. Now that higher education is a thoroughly penetrated market for historical capitalism, many of its students become proletarians as surely as if they had went to work in the nearest factory-only it is not the lonely capitalist who profits but rather the university institutions and the state. The funding models of higher education depend on a floating student body, just how labor-intensive industry depends on a floating labor pool; both groups of people come to resemble each other more and more in terms of base material economy in relation to overall American wealth.

The trappings of economic success-a diploma, the social capital of calling oneself educated-only signify the sort of well-being to which people aspire. Those trappings do not guarantee it. Indeed, even many of the teaching scholars who profess at America’s universities still have debt from their undergraduate years well into their careers that prevent them from attaining the truly middle class lifestyles their students expect to earn. The academic phenomenology of the indebted teacher becomes the capitalist yoke of the indebted student who, upon graduation, in all likelihood does not even know the definition of “liberal capitalism.” It is odd, given America’s general strain of individualism, that it has become a normative part of life to amass such large amounts of debt-that the insistence on neoliberal economics binds the citizenry that much more powerfully by debt-relations than by individualism. Such a process is bound to produce discontent not in isolated outliers but in a whole cohort of the population.

The cornerstone of proletarianization is that one expects, in resignation, to work for low wages in industry-any industry, at that. The structural similarity between the historical proletariat and the new student proletariat is profound enough to warrant its assertion; even if standards of living have increased for the working class since Karl Marx’s 19th century by vast leaps and bounds, the group of people graduating from universities with mortgage-sized loans fit into the same category of social utility as that historical proletariat. An indebted youth cohort is very good for capitalist endeavor-businesses, having already offloaded job-training responsibilities to the colleges, can expect an incoming workforce that is more desperate for employment because of the debt-burden-and it is very good for the state, since so many students attend public universities. Given that universities, once homesick spaces of learning and temporary poverty, have become profiteering enterprises of not only education but also entertainment akin to theme parks, they produce permanent poverty under the current administrative model of offering high loans to undergraduates.

Consider the critical theorist Theodor Adorno’s observations, in “The Culture Industry” section of Dialectic of Enlightenment, on “the original affinity between business and entertainment” which “reveals itself in the meaning of entertainment itself: as society’s apologia” (115). Even the studious and earnest student plays today and pays tomorrow in the contemporary university-the hardships of education are passed onto not the undergraduate of today but the graduate of tomorrow. The right to proletarian entertainment is not the “jazz-machines” of Adorno’s era, but the sites of higher education which only since the 1980s welcomes proletarians on their credit. Through a Kantian education that is supposed to free them from external determination, the young have become mere objects of financial speculation, as well as objects of exploitable and undifferentiated labor. The parallels in labor, in relation to the social totality, suggests that the average student body upon graduation becomes the reproduced proletarian body due to debt peonage, which has always been the chief exploitable force and method in industrial society.

In contrast, the medieval institution of journeymanship, by which a student learns gradually more and more from a teacher-worker, was not a relationship of bondage so much as a relationship of tutorship, but despite the modern university’s medieval roots in these practices, the emergence of student debt of such magnitude renders null those benign roots. The indebted student is, as a rule of thumb with its exceptions, rendered by the system of higher education the indebted servant to capital. Working-class 18 year olds ought not be the victims of financial speculation instruments wielded from above, nor should the narrative of enlightenment reproduce inequal relations of capitalism on their shoulders. Beyond this, it is perhaps symptomatic of general living conditions that so many working-class students are attending higher education in the first place-that being poor in a world-historically dynamic economy is that much more intolerable than in the past.

The most worrying facet of this indebting process is the public insistence that students from low-income families attend university on credit. Born into poverty, they can expect to continue enduring it even upon graduation, even if they amass the scholarships and grants that are geared to supporting them. Given the statistics on debt provided by The Institute for College Access and Success, this low-income cohort is the most vulnerable to predatory lending, and so becomes the most indebted relative to their wealthier peers. The class determinism inherent to this shifting of capital from private business to the educational sector all too often makes poor teenagers into poor students into poor working adults. The kinds of jobs these students were taught never to do, by their parents who worked those very jobs in order to keep food on the table, are the only kinds of jobs available to the majority of indebted students upon graduation. While standing debts that pose no possibility of discharge in bankrupty might be good for the speculators of the macro-economy, it represents a monumental burden for individuals and especially those individuals who compose the working class. The pedagogical theorist Henry Giroux suggests in his 2014 book Neoliberalism’s War on Higher Education that the funding mechanisms for American universities are abrasively neoliberal, in that they are extended to students only in the interest of maximum returns on investment-and not only does the funding mechanism support inequality, but also the class interests vested in university research that favors the wealthy over the interests of the poor: the aspirant young become as grist for the capitalist mill by the very institutions they were taught to trust since birth.

The sociology of student debt suggests that indebted working-class students will live in, in relation to society at large, the same socioeconomic position as their parents despite their higher educational attainments. According to findings in the economist Dr. Thomas Piketty’s Capital in the Twenty-First Century, “even with the considerable increase in the average level of education over the course of the twentieth century, earned income inequality did not increase,” and neither did “the intergenerational correlation of education and earned incomes, which measures the reproduction of the skill hierarchy over time” that “shows no trend toward greater [social] mobility over the long run” (484). The cycle of sociological immiseration thus continues unabated, no matter how loud the college yells of freedom and democracy resound, for someone-most likely not the student-profits off the exploited student body. The social utility of higher education transforms, under capitalism, into the private utility of the capitalist; the social affectation of education-as-commodity transforms into the relations between master and bondsman in the new feudalism. Cultures are changed not by the beliefs of the old but by the beliefs of the young. Where the forces of conservatism-not necessarily undesirable in themselves provided they are matched with creativity-over-reach their purview is in the debt-relations extended to the young, who alone amongst the age groups offer history an American future.

Youth is a time for creative experiment and creative destruction, for healthy questioning of the decadent status quo, for sane inquiry into our insane history; it is not a time to be enslaved to financial circumstance, the time clock, or the manager with delusions of grandeur. Such inexuscable waste now doubtless bears future repercussions. Education has always had its costs, and any prosperous society has paid them-but to what result? Creating a vast age group that, in coming to political and economic consciousness, despises the institutions that led it into servitude is not only damaging to the quality of life the students themselves experience. It is also damaging to the self-serving patriotism that conservative forces depend on, for student debt loads only foster distrust of hallowed institutions. “Mistreat the young,” the old adage goes, “and doom the old.” Not only this, but it is also destructive to middle-class capitalism itself, for a generation that pays student debt is a generation that does not buy homes-a high mark of complaint given that so many American cities are falling into infrastructural decay and personal poverty. The populist imperative to preserve a future worth living in need not clash with the profit motive, provided speculators find means other than the young to achieve their profits. The theory of higher education-its opening of access to a more democratic cross-cut of the classes-ought to inform its more predatory practices which, under the debt-relation, only reproduces poverty.

A Victorian patriarch despite himself, Marx despised the immiseration of proletarians most of all because their subordinate positions rendered them incapable of independence, as though by virtue of their servitude they became adult children permanently. Similar in his criticism was that the chief goal of the working class is self-abolition, that is, the working class’s aspiration is to no longer be working class. In seeking to escape the mire of poverty amidst splendor-for America remains the wealthiest country on the planet-working-class students all too often dig themselves deeper into the poverty trap, however adorned with diplomas its ever-heightening walls become. The only way out of the poverty trap for most of them is to become the very thing they were taught not to become by their parents and their professors: bonded servants, or, as the economist Frederic Lordon calls them,willing slaves of capital,” in his book of the same name.

It is not that state involvement in higher education is destructive to the common weal. Far from it-higher education is definitely an institution best left to public administration, for it is a valuable aspect of the commons and its democratic purview. The attendance of higher education may represent one area where the erosion of the commons, at first appearance, has not progressed. But the erosion of the commons occurs where capital privatizes public utility, whether or not it happens in land-grant universities or in private colleges. Where the danger lies is in the inter-relationships between the state and funding models that target the poor for the benefit of the wealthy, thereby fostering uneven development and the reproduction of the conditions of poverty for the working class. Were the attendance of university by the poor and the children of the poor not incumbent upon credit, and therefore upon their probable future immiseration, higher education in America would actually function in harmonious accordance with its original raison d’etre: the humane enlightenment of society no matter the class situations its members may have happened to inherit in the lottery of birth.

Works Cited

Adorno, Theodor & Horkheimer. “The Culture Industry.” Dialectic of Enlightenment. Stanford UP, 2002.

Althusser, Louis. “The Reproduction of the Conditions of Production.” On the Reproduction of Capitalism. Verso, 2014.

Eagleton, Terry. “The Slow Death of the University.The Chronicle of Higher Education. 2015.

Giroux, Henry. Neoliberalism’s War on Higher Education. Harmarket, 2014.

Graeber, David. Debt: The First 5000 Years. Melville House, 2012.

Klein, Martin. “Pawnship.” Historical Dictionary of Slavery and Abolition. Scarecrow Press, 2002.

Lordon, Frederic. Willing Slaves of Capital: Spinoza and Marx on Desire. Verso, 2014.

Piketty, Thomas. “Regulating Capital in the Twenty-First Century: Do Educational Institutions Foster Social Mobility?” Capital in the Twenty-First Century. Harvard UP, 2014.

TICAS.Quick Facts About Student Debt, March 2014. The Institute for College Access and Success. 2014.

Wallerstein, Immanuel. Historical Capitalism. Verso, 2011.