As the Occupy Wall Street movement spreads to dozens more cities and towns, it’s waking many Americans to the unrivaled control Wall Street exerts over American politics and the economy. It’s also shining a spotlight on the crushing amount of debt carried by Americans today – debt that’s at the core of our lingering economic troubles, which many experts believe can never realistically be repaid.
In 2007, American debt was 100 percent of GDP; today, after an austerity binge, it’s down to 90 percent, which is still a stunning imbalance. Almost a quarter of all home mortgages today are currently underwater, 2 million homes are in the foreclosure process – and at least 5 million homes have already lost to foreclosure since 2007. American student loan debt is over $1 trillion right now, higher than American credit card debt, with the average student leaving school with about $24,000 in loans.
The debt crisis that’s at the heart of the global economic crisis has sparked some fascinating debate about whether and how American banks should restructure and even write off some of that debt. Our own Alex Pareene proposed that writing off all consumer debt should be a demand of the so far demand-free Occupy Wall Street movement. In fact, even some mainstream economists back some form of debt write-off. Last week a Reuters special report found surprising establishment support for some modern version of the biblical concept of “Jubilee,” a recurring period, every 50 years or so, during which debts were forgiven.
Reuters gets one thing wrong: It claims the notion of “Jubilee,” hilariously, came to public consciousness thanks to a 2009 “South Park” episode about it (in which Kyle used a credit card to pay off everyone’s debts, in order to stimulate the local economy). In fact, more than 15 years ago, an inspiring global movement coalesced around a demand for “Jubilee 2000,” to free developing nations from their crushing debt burdens to public and private lenders and the austerity imposed by the International Monetary Fund.
I turned to political economist Ann Pettifor, the director of Jubilee 2000 from 1994 to 2001, to get her thoughts about OWS. She is the director of Advocacy International as well as the macroeconomic think tank PRIME. Pettifor is also the author of the prescient 2006 book “The Coming First World Debt Crisis” and, more recently, with Maz Kessler, of “Cutting the Diamond: How to Shape a Movement to Make Transformational Change Happen.”
Are you encouraged by the OWS movement in the U.S.?
I am cautiously trying to understand the OWS movement from a distance, but from the news and intelligence that I have gathered, I am hugely encouraged and inspired. It is a movement that has already, in just a few weeks, given voice to many thousands of impoverished and indebted Americans, and that alone is a significant achievement. Once people are given voice, and once they understand that they can act collectively, there is no knowing what transformative power they find within themselves. So I watch with some anticipation as this movement changes the dynamic between people, the White House and Congress, and between people and Wall Street.
It strikes me that this American movement stands on the shoulders of the very first, the American Revolution. As Benjamin Franklin argued, the colonists were provoked into revolt by the greed of British bankers, who bribed Parliament to introduce a Currency Act, which made it illegal for the colonies to print their own money. This meant that all taxes to Britain had to be paid in silver or gold. Those without silver and gold had to borrow them at interest from the banks – causing debt, unemployment and poverty to escalate in the colonies.
Then there are the broad shoulders of the “Greenbackers,” who just over a hundred years ago invented the idea of the March on Washington, and argued for detaching the dollar from gold to allow government to spend freely on job-creation programs.
Yes, and all Americans learn about that, if they learn anything, is the out-of-context William Jennings Bryan quote about the “cross of gold” – and then that Bryan opposed Darwinism during the Scopes trial. He’s remembered as an eccentric, if he’s remembered at all.
Bryan was wrestling with a really difficult issue: the nature of credit and the power of the producers of credit vs. the power of the producers of food, goods and services. And he and his followers didn’t get it right, and yes, he was wrong on some other big issues. But he and the Greenbackers resisted Organized Money, and so we should not be surprised that their resistance is deliberately forgotten. “The Wizard of Oz” is all that remains of their story, and the true meaning of that story is lost to today’s generations.
Then there are the shoulders of 1930s Americans, including American Democrats, who four years after the 1929 Crash resisted the predations of Wall Street, and elected a government that tamed the finance sector. So to watch a people’s movement rise up against finance again — on the shoulders of these great Americans — is indeed a privilege.
How important is the symbolic power of targeting Wall Street?
Targeting Wall Street is not symbolic. And Wall Street’s power is not symbolic either. The 99 percent are right. Wall Street is where U.S. financial and political power lies. The United States is a bank-owned state that enslaves its people in debt; and Wall Street is home to the banks. Congress is in debt to Wall Street. In other words, like many Americans, Congress is enslaved.
Although the movement has yet to coalesce around a set of demands (to the chagrin of more pragmatic, action-oriented activists) it’s clear that the issue of bank power and consumer debt is practically and symbolically resonating. Are there any parallels with the early development of the Jubilee 2000 movement? And will you briefly describe the movement.
Jubilee 2000 was a campaign that mobilized many millions of people in more than 60 countries behind an effort to “break the chains of debt” that effectively enslaved poor debtor countries to rich creditor countries. Like the British 19th century anti-slavery campaign, Jubilee 2000 arose as a response to a movement – people in poor debtor countries demonstrating against and resisting decades of foreign debt repayments, and the associated International Monetary Fund “structural adjustment” programs.
The IMF was, and is, the agent of the finance sector, all global creditors, official and private. Riots and resistance in debtor nations were triggered by policies imposed by the IMF on behalf of bankers, and included hikes in food and gasoline prices, increases in unemployment, cuts in government programs – all designed to generate resources for the repayment of foreign debts. Jubilee 2000 set out to place pressure on creditors, one of which was our own government, to cancel these debts, and thereby render the IMF and its policies redundant.
But let me make clear: Jubilee 2000 was not the anti-debt, anti-IMF, anti-globalization movement. It was a campaign that for a few years harnessed a part of the global anti-debt, anti-IMF movement behind a specific, achievable goal: to drop the debt [of the poorest countries] by the year 2000, under a fair and transparent process.
Movements are broad, collective mobilizations, often arising spontaneously in response to injustice. They are vital in giving voice to the voiceless. Campaigns are organized, have institutional capacity and adopt specific goals and targets. If well-designed and thought through, campaigns can harness the energy and power of a movement to achieve specific goals. Examples of great campaigns that harnessed movements against injustice, and achieved transformative change, include the movements to abolish slavery, to win the vote for women, to expand civil and political rights to African-Americans, and in this case, to “Drop the Debt.”
All of these campaigns had a specific legislative goal that altered the balance of power: between slaves and their owners; between women and men; and between black people and white people. Jubilee 2000 succeeded in one of its goals: getting about $100 billion of debt written off for 35 poor countries — a huge achievement. But we failed to achieve structural legislative change. We failed to alter the balance of power between international creditors and sovereign debtors.
Instead, under pressure from millions of campaigners, creditors caved in. They, not an independent tribunal, decided which debtor country would get relief, how much relief would be given, and the terms of the relief. If we had achieved structural change, the debt write-offs would have been much bigger, Greece would not be in turmoil, and the eurozone would not be in crisis.
I feel a little strange linking the American consumer debt crisis to the global crisis addressed by Jubilee 2000, which was an effort to help desperate impoverished nations get out from under their crushing debt to powerful nations, including the U.S. And yet, it seems as though we can link the forces pushing debt, with harsh conditions, on struggling countries, with the forces pushing debt on American workers, students and families. Can you help me tease that out a little?
There are strong parallels between the Wall Street resistance movement that is growing in the U.S. today, and the IMF resistance movements that mobilized people in poor, debtor nations from the 1970s onward. The most important is this: both sovereign debt – the debts of whole nations – and individual, household and corporate debt in the U.S. rose dramatically after the deregulation of the private finance sector in the 1970s. Associated with this rise in debt, were policies that impoverished those without financial assets, and wildly enriched those who had gained financial assets – by fair means or foul.
These levels of debt did not exist in the immediate postwar period. There was not a single international financial crisis between 1945 and 1971 according to the great historian of the financial system, Barry Eichengreen. And similarly, Americans were not burdened by rising debts and falling incomes during that period. The unregulated, liberalized expansion of credit and debt began quietly after President Nixon unilaterally dismantled the Bretton Woods system in 1971. Liberalization was given further impetus by President Reagan and later President Clinton, and as a result the rise of ultimately unpayable debts accelerated in the ’80s, ’90s and ’00s.
Millions of Americans are today enslaved by what in biblical times was called “usury,” the exploitation of those without money by those with money. Bankers and financiers whose place it is to act as “servant” to the real economy in which Americans work and live, have instead become “stupid masters” of a world crafted, designed, worked and built, not by financiers, but by ordinary hardworking Americans.
As Ramsay MacDonald, Britain’s first Labour prime minister, once argued, “No community can be free until it controls its financial organization….”
The Occupy Wall Street movement seems to understand this.
Not that you or I are in charge of crafting either demands or proposals for OWS, but what might be some ways to approach a call for debt forgiveness? Can you start with student loans? Mortgages?
I would not use the language of “debt forgiveness.” This phrase was strictly prohibited in Jubilee 2000, because it implied that the debtor was the “sinner” and needed “forgiveness.” Instead we argued that there is co-responsibility for the debt, and within that frame the more powerful creditor must take a greater share of responsibility for the losses associated with the debt. As things stand in the U.S., as far as I can see, Wall Street takes no responsibility for the vast debts it heaped on the shoulders of working Americans – debts vast as space.
Second, I would absolutely demand a “Debt Jubilee” – especially for students – based on the biblical principle outlined in Leviticus 25. A very large proportion of the debts owed by the American people cannot and will not ever be repaid. And if this debt is to be deleveraged in a disorderly, unmanaged way, then America will have decades of economic failure and social unrest ahead. Unfortunately, Wall Street bribed and lobbied the second Bush administration to implement a much tighter bankruptcy law, which favors lenders and penalizes debtors. This law will have to be modified, and a “debt Jubilee” introduced.
We must remember that Jubilee principle is not just a tradition of the Torah or Old Testament; it was fundamental to the American Revolution and subsequently to the fight against slavery. It is a powerful symbol of American independence, which is why the text from Leviticus 25 is engraved on the Liberty Bell in Philadelphia: “Sound the trumpet of Jubilee, and declare Liberty throughout the land.”
Are there lessons from other crises in other countries?
I think the lessons to be learned are American. There are the lessons from the Revolution; the failed “Greenbackers” movement, and their populist leader, William Jennings Bryan. Above all, there are the lessons taught by President Franklin D. Roosevelt. In the 1930s, under Roosevelt’s leadership, Wall Street was once again made servant to the people of the United States. The Pecora Hearings dragged bankers into Congress to explain their misdeeds. Structural legislative change, in the form of the Glass-Steagall Act and the setting up of the FDIC, subordinated bankers to the interests of the economy as a whole. In his famous Oct. 31, 1936, speech, Roosevelt describes the
… struggle with the old enemies of peace — business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob. Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me — and I welcome their hatred.
I’d rather look forward than backward, but did the Obama administration miss any key solutions as it dealt with the banking crisis and TARP in 2009?
Unlike President Roosevelt, President Obama and his advisors did not seem to welcome Wall Street’s hatred. Instead, in a fatal miscalculation, they bowed to “organized money.” Wall Street bankers were bailed out – unconditionally. Unlike the contracts that enslave millions of Americans, there were few “terms and conditions” for the bailout, and by the time the administration finally got around to discussing these in Dodd-Frank, Wall Street bankers had succeeded in turning Congress into a “mere appendage to their own affairs,” in Roosevelt’s words.
Occupy Wall Street is mobilizing a movement. We now need a second American revolution – a campaign that will structurally alter the balance of power between ordinary Americans and Wall Street.
Are there practical sorts of proposals, or next steps, you’d like to see this movement begin to coalesce around?
This one is tricky. I hear from friends that there is determined opposition to leadership, and therefore to organization. And I respect that approach by the movement, as well as their processes for communicating and mobilizing. There is profound disillusionment with both President Obama and political organizations, in particular the Democratic Party.
So it is not for me to suggest any practical steps. However, I do believe, as I am sure many of the 99 percent do, that just demonstrating is not enough. Specific campaigns and organization to achieve structural legislative change will be necessary.
But for now, let’s wait and see how this new movement spreads and grows. For the first time since the crash of 2007-09, I am optimistic!