Canceling sovereign debt is an ecological demand

After years of mobilizing, the US national campaign demanding the cancelation of student debt achieved a victory when Joe Biden passed an executive order to subsidize the dropping of a percentage of the debt. Previously, this demand was rendered as utopian and irresponsible. Now, it has achieved some limited legitimacy. Although the American administration did not entirely fulfill the demands of the movement — the percentage of the debt that was dropped was lower than what was promised by presidential candidates Bernie Sanders and Elizabeth Warren, for example — the movement has now proven once more that seemingly utopian policies cease to be utopian when backed by wide momentum and creative, ambitious vision. But more importantly, for my purposes here, is that the demand for debt cancelation has once again been put on the agenda. The objection that it is a reckless, populist demand doesn’t hold much water anymore.

This is not the first time we see a contemporary organized movement demanding massive debt cancellation. Since the 1999 anti- (or alter-) globalization protests of Seattle against the World Trade Organization, and later, on the heels of the Argentinian debt crisis of 2001, a movement emerged that explicitly called for the cancelation of sovereign debt in the Global South. Perhaps this was best represented in the global Jubilee 2000 Coalition (which was founded in the United Kingdom in the early 1990s). Later on, more radical iterations of the idea emerged, such as in the writings of the late anarchist anthropologist David Graeber (this piece is an homage to him).

Three main arguments were put forward in support of sovereign debt cancellation (or debt relief) for the Global South. The first argument was that such a policy would assist with a degree of poverty alleviation around the world, since it would make available increased funds for projects to that end.

The second argument was historical: the idea of the debt jubilee. In the ancient world, defaulting on debt meant that the debtor would be enslaved or become a serf to the creditor. This meant that the debt relationship always had an element of domination to it, although it was also simultaneously a mechanism of creating networks of promises and trust among classes and individuals. In order to resolve this contradiction — that debt encapsulates both promises and threats, trust and violence — some ancient societies instituted periodic debt forgiveness in order to restore some sense of equilibrium and social peace. We see this, for example, in Solon’s laws of ancient Greece (which set the foundations of democracy later on), and in biblical Judaism (where every 49th year, debt forgiveness and the freeing of slaves were required by law). Therefore, the idea has ancient corollaries, examples that demonstrate how debt was always a compounded institution of domination and trust, slavery and solidarity. 

The third argument, related to the second, is the anti-colonial argument. Sovereign debt has always been a mechanism of colonial and neo-colonial dependency. Colonial powers would use the accumulation of sovereign debts, and the inability to repay them, as a way of controlling the finances of subaltern nations. And as always, the indebtedness of weaker nations is cast in moralistic terms, as evidence of their essential inability to self-govern. The link between debt, domination and moral guilt was exhibited once again. In more contemporary times, a milder, more local version of this argument emerged in Global South countries. It was argued that states or regimes that collected those debts were corrupt, undemocratic or unaccountable, and hence the people should not pay the long-term price of that indulgence. This could be described as the “procedural” argument: the mechanisms through which those debts were accumulated are corrupt and hence illegitimate.

As an aside, and this may be more of a speculative thesis – but have you noticed how our ideas of guilt, shame, accountability, redemption, just retribution and reparation are all laden with references to debt? Debt is at the center of our moral universe; it is the secret thread that strands our concepts of justice and responsibility. This is why confronting the institutions of debt is such a tough political exercise, because it requires a political standpoint that allows us to see how domination and common notions of justice are linked. When you enter the world of debt, you are forced to complicate your concept of justice.

And this is why it is now time to add a new argument for debt cancelation. Debt cancelation should be framed as an ecological demand. It is a necessary and urgent action for saving the planet and its inhabitants. The arguments to support this call match the arguments for debt cancellation that I outlined above, while placing them in a planetary perspective, in ways that also negotiate our understanding of justice.

1. Freeing up resources

We now know that any global action toward adaptation to or mitigation of the climate catastrophe will require massive government investments in green, clean and sustainable infrastructure. In the West, this is known as the call for a “Green New Deal.” To be sure, the Green New Deal is a reformist, not a revolutionary slogan. It is a demand for governments to take on the responsibility of financing the transition toward a green economy, akin to the older New Deal that was a response to the Great Depression. But the problem with current visions of the Green New Deal is that they are not global enough. They understate the extent to which the Global South bears much of the costs and the burdens of environmental degradation, and the resources that will be required to adapt to these consequences. The social-democratic, reformist vision of a Green New Deal does not include a parallel framework for global ecological (in)justice.

States in the Global South now must also invest in “defensive” infrastructures that protect against and compensate for ecological collapse: food reserves, alternative farming, dams, sanctuaries, new housing to absorb internal migrations, medicines and health budgets, or even basic regulatory frameworks that preserve natural resources and biodiversity. All of this requires governments to reverse the privatizations of the commons, those natural landscapes that should be preserved and used as public goods held in common, rather than subject to the imperatives of private market calculus. Not to mention also that as in the West, most transitions to cleaner energy sources will have to be led by investments in new infrastructures that could only be afforded by governments — if those countries still wish to continue on the path of industrial developmentalism (which is a parallel debate altogether, for another time). If we assume that “growth” or “development” will remain the horizon of poorer countries, this means that governments have to step in and prevent urban sprawl (the expansion of less ecological and less dense urbanization in the form of suburban living), and to maintain basic public infrastructures like electricity, water, heating, sewage and roads that continue to be in danger of collapse (and which also have to be “greened”).

None of this will even be thinkable as long as governments in the South are forced into austerity. All of those measures — no matter what our visions and time horizons are — will require massive public investments. This is why both governments and activists are calling for some form of global transfer of funds or aid to afford those fiscal requirements. Now, governments and activists use different languages to express this. The governments say: the West/North bears most of the responsibility for this catastrophe; if you want us to act, you better give out the cheques. We can detect this rhetoric among Egyptian policy leaders, for example; the loss and damage fund proposition being put on the negotiations table at COP27 was deemed a success for the conference presidency, i.e. Egypt. The activists make the same demand in the name of anti-colonial reparations: the current underdevelopment was caused by colonial extraction, so you better correct this original sin first.

But there’s a world of difference between framing those global transfers as aid, as redistribution or as reparation. In fact, I don’t know how we could differentiate in practice between those things. For how can we ensure that whatever transfers or assistance that occur will not reproduce dependency? We know that development aid tends to flow into rentier activity; since it is usually outside democratic control, it is tied up with paternalism and conditionality, and leads to vicious cycles of bad incentives where misuse of resources becomes a pretext for the next round of aid. I am not sure how framing this assistance as “reparative” can entirely prevent this either.

I propose that canceling debt is one way to escape this problem. Debt cancelation means a freeing up of resources without the concomitant increase of dependency, rentierism or aid traps. To be sure, debt cancelation may not entail a direct influence on popular control or public good provision. But it is less subject to the bad incentives of aid/reparation since it circumvents the problem of who is to be the legitimate beneficiary and recipient. Debt cancellation is already a net collective good, since sovereign debt is already a collective burden that is born by present generations and future ones. To put it bluntly, debt cancellation is an exit from the logic of moral exchange altogether. It suspends the logic of tallying costs against each other, whether these costs are economic, political or moral. There is something about debt cancellation that goes against the common sense of economic reason — the calculus of costs and exchange. We do not have to bicker over who is to be the “legitimate” beneficiary of this or that aid package, and forgiving debts means suspending the question of the “good” recipient altogether. This is why there is something liberating about it. It is a net collective good that saves us from the tyranny of morality itself.

2. The historical institution of the debt jubilee

For as I said, morality and debt have a secret, complicated complicity. Debt generates the networks of promises that sustain trust; I could trust you because you were previously indebted to me and had repaid your debts. Debt is the “test” of trust, and trust is sustained by promises. The bad side of this dynamic is guilt. A bad debtor is marked and stigmatized by guilt, the guilt that comes from the failure to carry out one’s promised obligations. It is not moral or legal guilt that logically comes first, but the institution of debt. In contemporary moral logic at least, the bad debtor is deemed as reckless, irresponsible, indulgent and corrupt. And to make matters worse, and as ancient traditions knew too well (remember the ban on usury?), excessive debts are a tool and mechanism of domination. Those who fail to repay their debts (the underclasses) are on the verge of falling into slavery or debt peonage. And creditors take advantage of this[1]. So: debt = promises = trust, but also, debt = legal and moral guilt = slavery. Public finance is a playing out of this drama, a network of circulating promises and guilt, where the state is the biggest debtor of all. Collective promises sustain it, but so does collective guilt. And if the logic of capital accumulation entails the endless generation of “value” out of itself, this also requires a circulation of the fictitious value of debts — debts to the future. Justice, promises, exchange, guilt, domination, accumulation and debt; these are all the same story.

Thinkers have now noticed that the source of ecological degradation during early modernity — the 15th and 16th centuries, with the colonization of the New World — lies precisely in this endless projection of human power into the future. This is the temporal imagination of capital: endless productivity, endless growth and endless mastery of nature, projected into the indefinite future. But this also translates into the endless accumulation of financial debts into the future. I must increase my productivity now because I have debts to pay tomorrow, but the only way I could match the required productivity is to collect more debts today. Ancient societies saw matters differently. Time was cyclical, and with each cycle, society and the cosmos restore their balance. This explains the institution of the debt jubilee, when a ruler would announce the forgiveness of debts. It was a way to prevent those wheels of debt, guilt and domination from spiraling off of their axes.

Ecological transformation entails confronting this entire logic. Sovereign debt cancellation is precisely this imaginative leap. One, it is a declaration against the stigmatization of debtors, especially debtor nations, more often than not, formerly colonized nations. Secondly, cancellation places a temporary reprieve or pause to this logic of justice, exchange and accumulation, bringing into view the need to restore some measure of collective trust from a new starting point. And one can hope that such a pause will evoke new imaginations of democracy and liberation.

3. A better form of reparative justice

Ecological justice demands reparation against colonialism and historic racism, or so anti-imperialist climate activists proclaim. I have my own hesitations against all contemporary talk about reparation. Again, the problem of defining the beneficiary/victim is insurmountable. Is the reparation collective or individual? Is it a “just compensation” for a prior crime, or an “affirmative action” for present inequality? And who is actually “guilty” of the historic oppression here — the dead or the living? And worst of all, will the tallying of crimes against “money transfers” entail that I would forever be remembered as the victim? And isn’t there something suspicious about the idea of monetizing past crimes?

There’s another, better way of performing the act of reparation. Instead of compensating for the crimes of historic oppression by transferring the guilt onto its present beneficiary, I propose that we suspend the guilt (debt) altogether, by forgiving the debts of the oppressed and ending their subjection to the moral standards of indebtedness. Indeed, this may be an act of forgetfulness too. It does not entail the same degree of “acknowledgement” of past crimes, only the need to escape their effects today. So what? Survival is more important and urgent now. I would rather escape the very label of victimhood and the sad self-punishment it invokes in the endless wait for payback. But debt cancellation is still reparative in a different way. It would begin to repair the human solidarities required to face up to the apocalyptic challenges ahead. And this may necessitate a temporary break from economic reason and its notion of “just exchange.”

Considerations

Whenever I present this idea to friends or colleagues, the usual objection is that the argument for debt cancellation is not immune from the same instrumentalization of requests for aid, especially by corrupt or tyrannical governments. Moreover, there is no guarantee that it will necessarily be democratic or lead to institutional repair. Indeed, it can be a way for corrupt regimes in the non-Western world to wiggle their way out of accountability for their failures or crimes. 

A second objection is that there is no occasion for making this demand legitimate now. For example, in the context of Egypt, the previous movement for debt cancellation was triggered by the transitional period following 2011, when it made more sense to say that the debt was accumulated unaccountably and so the people have no obligation to pay. Historically, debt relief only became available during transitional periods or as part of aid packages, and debt restructuring followed negotiations in the aftermath of defaults (Argentina is an example). What occasions call for sovereign debt cancellation?

I say: nothing occasioned the demand for student debt cancelation either. It was an equally utopian demand, and the argument for it stemmed only from egalitarian considerations. There’s a lesson to be learned and studied here.

Will the demand be instrumentalized by authoritarianism? Surely, but the question must be: is it less or more vulnerable to instrumentalization compared to reparations and/or aid? I think it is less vulnerable. Because even if the policy allows some room for corrupt regimes to get off the hook (Greece is an example here), it is more effective in breaking the bad cycles and incentives that sustain authoritarian austerity in many dependent states. Massive debt is one cause for bad economic development policy in many places. It encourages short-termism, austerity, rentier activity, extractivism, and an addiction to more debt (and I am here talking about states and policy, not peoples, I do not intend to repeat the moralistic arguments against debt in general). Debt cancelation offers a temporary reprieve from this dynamic. It would allow us — the citizens — an opportunity to tell officials: “now you don’t have an excuse; fix this!”

But most importantly, debt cancellation is a way to experiment with the politically possible, beyond economic reason and just exchange. In this sense, debt cancellation is a “non-reformist reform.” Therefore, let’s reassemble the global movement for sovereign debt cancelation, while allying it with the ecological movement. But this would require the mainstream ecological movement to fix its parochialism. And most importantly for me, it opens the window for a different kind of anti-imperialism that is more promising, more democratic, and less burdened by the “developmentalist” and economistic obsessions of its predecessors.