Power Without the King: The Debt Strike as Credible Threat

Figures protest in front of Washington.

Taken alone, debts are individual problems. But when lumped together, they are a systemic threat. The threat of mass debt refusal could usher in a contemporary Jubilee. Credit: Caitlin Ng (caitlinng.com).

While most contemporary talk of Jubilee carries religious connotations, the first mass debt cancellations were likely born out of secular power consolidation. Economist Michael Hudson traces the earliest Jubilees to pre-biblical times, in periodic “clean slate” decrees issued by Bronze Age kings. While immediate motivations for the abolitions varied from instance to instance, an important common thread is that the rationale was most often material, rather than a spiritual ethic. In his Bible Review article on “The Economic Roots of Jubilee,” Hudson argues that the seeming magnanimity of these decrees was usually a product of “enlightened self-interest.” Clean slate decrees helped the rulers to maintain a stable empire in which the king was the primary locus of power and debtors remained loyal recruits for military campaigns. If the king did not release debtors from their obligations, then the debtors could threaten to gather together and release the king’s head from his neck.

In game theory, this is what’s known as a “credible threat”: the potential for pursuing action that by its mere plausibility shapes the strategies of others. In modern times the credible threat has largely evaporated, leaving debtors without tactical recourse in a deeply asymmetric struggle. This playing field cannot be leveled by appealing to legislators with moral arguments. This playing field can only be leveled when debtors develop and wield their own form of counterpower: the credible threat of revolt.

This sort of threat needn’t entail physical attacks on lenders or legislators (though the balancing potential of the proverbial “pitchforks and torches” should never be underestimated). Instead, debtors can establish their willingness to withdraw compliance. They must demonstrate that they can stop paying, en masse. Oil tycoon J. Paul Getty captured this succinctly when he said: “If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” Taken alone, debts are individual problems. But when lumped together, they are a systemic threat. The threat of mass debt refusal may not only bring about a contemporary Jubilee, but could also change the terms of future debts—and perhaps much else.

Rejecting Market-Based Solutions to the Debt Crisis

There is certainly no deficit of calls for a democratic solution to the debt crisis. The majority of these calls, however, rely on a painfully narrow definition of “democracy,” referring only to the kind of democracy practiced by an electorate represented in legislative bodies. Commentators ranging from the editorial board of the New York Times to progressive activists with the Campaign for a Fair Settlement have pleaded for legislation that will change the terms of debts or even write down their principal. Even the usually sharp and radical-minded magazine The New Inquiry made an uncharacteristically liberal suggestion that decisions about the debt crisis be “made ... through the ballot box.”

What most of these earnest commentators miss is that the lenders’ and legislators’ crisis is not the same as the debtors’ crisis. To power, the crisis is not that lives are being ruined by mountains of debt, but rather that the streams of revenue on which the economic institutions depend might dry up or at least fail to sustain their current pace of growth. In other words, to power, the only concern is making debt “affordable”—and thus permanent.

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