Debt Obligations and Hierarchy

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Matt Cropp:

"most interesting element, from a credit unionist perspective, is his discussion of the fundamental nature of debt. As he makes very clear, debt is such an essential element of our culture that we rarely stop to really consider its particulars. As such, he sets out to do just that, stating that, at its core, "Debt is a very specific thing ... It first requires a relationship between two people who do not consider each other fundamentally different sorts of being, who are at least potential equals, who are equals in those ways that are really important, and who are currently not in a state of equality--but for whom there is some way to set matters straight." (120)

A debt between two individuals thus creates a temporary hierarchical relationship between them, and in societies in which the alienation of relationships pioneered by slavery has been internalized, such debts can then be transfered to, or even originated by, a creditor with no interest at all in the wellbeing of the debtor as long as the debt continues to be serviced. As a result, debts in such societies can make the status of debtor virtually a form of slavery as they are pushed to do things that would have been unthinkable had the need to pay off their debts not been hanging over their heads.

A fascinating example of debt-obligations leading to incredible brutality can be historically located in the example of the conquest of Mexico. The leader of the small Spanish expeditionary force, Cortes, was deeply in debt, and saw the expedition as his chance to finally extricate himself from that situation. The incredible brutality of that campaign and of the genocidal working conditions later implemented by his lieutenants in the mines they administered has been traditionally been chalked up to the barbaric greed of thuggish conquistadors. However, Graeber argues that, as debtors, those men actually did not feel that they had much choice in the matter of how they behaved. In order to fend off their creditors, they had to extract as much wealth as quickly as they could in order to avoid being shipped off to Spain in chains, and their creditors, being distant and disconnected, cared little about what they were doing as long as the interest payments kept rolling in.

In light of this understanding of debt, the credit union project takes on new meaning. In contrast to the alienated quasi-slavery that resulted from being deeply indebted to a usurious loan shark, the credit union offered a different way of being. Instead of debt creating an hierarchical power relationship between the debtor and the lender, receiving a loan from an institution in which the debtor had an ownership stake allowed, in many cases, for being in debt to not have the effect of breaking the debtor's equal standing with the other members of his or her community. In addition, the "esprit de corps" that Roy Bergengren saw as a characteristic of many small credit unions functioned to limit the disconnect between the debt and the personal situation of the debtor. Old minutes of credit committee meetings are replete with instances of a loan being adjusted, or even written off, due to circumstances of legitimate hardship. As such, an appreciation of Graeber's perspective on the intersection of debt and power serves to provide a deeper understanding of the nature of the liberation that credit unions offered many people of modest means in the 20th century. The credit union was not simply a way to get better returns on one's savings or cheaper credit; it also offered a way for people who had been deeply socially degraded by debt to recover their dignity." (