From a semantic point of view, “should” pertains to the domain of ethics. Some debts are said to be immoral or illegitimate, for example those contracted in the dictatorships of Southern countries or the (often unavoidable) excessive debt of certain families in precarious conditions. Obligation also refers to the legal aspect: the failure to pay debts can lead, depending on the context, to slavery, prison or dependence on the International Monetary Fund. “Always” stands at the heart of this issue: are there exceptions or, conversely, is there an irrefutable iron law?
This question calls for a deeper understanding of the context of each situation. But, whatever the debt, its handling will depend on an underlying power relationship, whether expressed or not. The term “pay” introduced us to the intricacies of repayment techniques, from immediate payment to outright cancellation, not forgetting debt rollover. The adjective “your” is not neutral! Is the initial borrower always the final payer? Who is responsible for the debts of Southern countries? Or those of European states? What about those inherited by future generations? Finally, the word “debt” mentioned in this article serves as a catch-all phrase, evoking a wide range of situations, some of which are tragic, grotesque, and others of which are positive and emancipating.
Debt, at what cost?
To take on debt is to compensate for a lack of liquidity. Cash flow means here and now. It helps us live from day to day. It should be noted that one can be rich and still be short of cash. Being indebted does not necessarily mean living beyond your means. A company or a country can be wealthy and not be able to use it. As the saying goes, a debt is a future promise, but it can also be the beginning of a race against the clock.
The main characteristic of the future is its unpredictability. The creditor gambles on the debtor’s promise to repay. There are several ways to protect oneself from future hazards: mortgage, state-guaranteed loan, solvency of companies, violent threats in case of non-payment, etc. The very essence of any debt is the letter of credit, a strong relationship that must stand the test of time. Debt is first and foremost a relationship in time. As written about by Nathalie Sarthou-Lajus, it can represent addiction and dependence, as well as emancipation and alliance. It is thus necessary to appreciate the multiple facets of debt and to grasp its ambivalence, especially in crisis situations. Debt can force states to fall to their knees, and can put a noose around the neck of over-indebted individuals. How can one come to pay with one’s body and one’s life to pay off an insolvent debt?
Explore other models
It is not only when debt is contracted that the ethical dimension is involved, it is throughout the repayment process. The debtor and the lender are not equal. It is not, as we say in economics, a zero sum game. The creditor expects his money to be profitable and to earn interest. Charging a high interest rate is immoral and even illegal in some countries. Like money, letters of credit can pass from hand to hand and become anonymous.
However, the link with concrete reality remains essential. The indebted person or institution is rooted in a community, which will also have to face the hazards of the future. In times of crisis, debt links are affected by the collective environment. The debt is not privatised to the only two debt signatories, it reflects the life of the community through time. This explains the call for the creation of a deliberate currency, carried by a community with the power to modify credit letters. Currently, such authority is restricted to national and central banks, although there is nothing to prevent other models.
The result of an arm wrestle
At national and international levels, conventions regulate the realities of indebtedness. They are meant to embody justice and ethics. They often reflect the reality of the power relationships involved. Debtors have little power to defend their cause against creditors. Their plea often calls for solidarity or for common interest: for example, in terms of employment, it will benefit everyone if a specific factory does not close. Furthermore, the power relationship can be reversed when the debt threatens the global system, when a company becomes too big to fail.
For internationalised debts (those of states or large corporations), the framework is more volatile. The major multilateral institutions – such as the IMF, the ECB or the Paris Club – only have relative authority. Not to mention the famous “vulture funds” that buy up “irrecoverable” debts for a few pennies in order to demand their repayment with no shame. In this globalised world, depending on whether you are powerful or miserable, court judgments [and economic games] will make you white or black!
Question of political courage
The temporal and collective dimension of debt makes it eminently political. Whether it is the debt of households, students, companies or states, its management is based on political choices that reveal a project common to a family, a territory or a nation. Debt is someone’s responsibility because, even when it is cancelled for the debtor, the cost falls on others. Choosing not to pay or to postpone one’s debt is politically choosing who should bear the cost.
When the burden of debt is shifted without control onto the shoulders of future generations, or when the over-indebtedness of populations in the South is not called into question, we are clearly abdicating our responsibilities today. A resignation that reflects the lack of vision on the part of our leaders. But, on the other hand, debt can be a symbol of political courage when a community needs to mobilise additional resources for the common good to come, such as the ecological transition or the reduction of inequalities.
Do you always have to pay your debts? Technically, the answer to this question can only be negative if one refuses any determinism that would ignore the dimension of the future’s uncertainty and the collective dimension of the debt relationship. During crises, these dimensions take on a more and more concrete face, calling for solidarity-based management.
Marcel Rémon SJ is a Jesuit and statistician, who runs the Social Research and Action Centre, Paris, which is the publisher of the Revue Projet.