SOCI 287 - Assignment 6 - A Modern Debt Jubilee PDF

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SOCI 267, sixth and final assignment. Debt Jubilee - topic from Rocket Scientist's Guide to Money and the Economy. Not my best work but 85%...

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1 Assignment 6 - A Modern Debt Jubilee

Athabasca University SOCI 287

2 The Rocket Scientists’ Guide to Money and the Economy, Mike Sosteric has written a simple but critical explanation of money, the economy, and the impact capitalism has had on the world as we know it today. Sosteric dives into the creation of the concept of debt, in particularly how it has impacted many individuals negatively. He also offers one solution to debt and the crisis it creates: a debt jubilee. In this paper, I will discuss how debt is currently impacting individuals and governments, and the impact on the economy should a debt jubilee take place. While not a new concept, the case for a global debt jubilee has increased in popularity over the years, especially since the turn of the millennium. A debt jubilee proposes a balancerestoring opportunity: cancel debt for the prosperity of the economy. Erasing all debt sounds shocking, but economist and author Michael Hudson describes it as “pragmatic” (NYT, 2020). When individuals carrying debt such as student loans or medical debts are forced to continue making payments, they are unable to spend elsewhere. This leaves less money being spent on goods and services and slows economic growth (2020). Hudson also argues for a jubilee in stating that it is not a matter of how long individuals might take to pay off their debts, it is a matter of facts that debts simply cannot be paid (2020). This is made clear in Rocket Scientists’ Guide to Money and the Economy: “when debt is introduced into the accumulation equation, people regularly end up with less than nothing at all, even though they work their entire lives to build something up” (Sosteric, 2016, p.95). In order to understand debt relief, it is important to first understand money, accumulation, and how debt occurs. Money, as described by Sosteric, is abstracted labour-time and can be used for economic exchange (2016). In the times of barter systems, a person could only trade if what they possessed was wanted by another person. Money, however, allows every individual the

3 opportunity to make an exchange for what they desire. Money gives freedom of choice to the people using it, instead of being restricted to only exchanging with the goods or services that they possess (2016). In addition to this, money allows individuals to choose the price of their goods and services. By increasing the price, an individual can cover their own costs, as well as make more money to be used for something else. This is where accumulation occurs and, eventually, debt. Debt is offered as a solution in the form of a loan to an individual, and ultimately the economy, when facing financial hardship. A loan, however, never comes without a price - interest - and when someone is unable to repay it, the burden of debt grows and perpetuates itself (2016). In Canada, government debt has become a major topic of discussion. Rising federal debt has severe consequences for Canadians, and the debt burden for Canadians has nearly doubled since 2008 (Fraser Institute, 2021). As a government pays its debts, it must, in turn, funnel funds away from other areas, and increase interest rates on lending (2021). The weight of this is felt by Canadian citizens in more ways than one: growing interest rates make borrowing more challenging for business investment, social programs such as healthcare, education, and social services can be impacted, and taxes can be raised (2021). All of this impacts the spending power of individuals and slows economic growth. In the United States, the relief of student loan debt has shifted to popular discussion in recent years, especially since the beginning of the COVID-19 pandemic. In the U.S., where the annual cost of university tuition is on average over eight times as expensive than in Canada (Miller, 2018), student loan debt totals $1.57 trillion held by more than 33 million individuals (U.S. Census Bureau, 2021). The Department of Education data shows that in 2016, nearly three

4 quarters of students graduating with a bachelor’s degree had student debt that averaged almost $30,000 (The Institute for College Access and Success, 2019). Those who hold student loan debt tend to delay marriage and children, choose against starting their own business, and delay investments or purchases (Herrine, 2020). With many people losing jobs early in the pandemic, the burden of debt has been magnified and spending power has shrivelled, causing further financial strain in the form of credit card debt or medical debt, as well as high levels of stress and mental health concerns. Of course, there is data that shows those with a post-secondary education tend to earn more throughout their careers than those without, making a university degree generally believed to be an investment in one’s future. With that being said, this is not always true, and the ultimate cost and impact of student debt may not be in balance with the benefits. As Herrine writes, “people experience their balance sheets moment by moment rather than over the course of a lifetime … and the other costs of debt should be accounted for” (2020, p.315). If the price to pay for student debt is more debt, high stress, and health concerns, is the burden worth the potential reward? In discussing student debt in the United States, one must acknowledge how student loan debt disproportionately impacts Black students and graduates. The Institute for College Access and Success reported that 85% of Black students graduating in 2016 held on average $34,000 in student debt (2019). This is 16% more students and $4,000 more than their white classmates. Debt of any kind is a burden to the individual, but student debt also impacts their family members. Herrine describes this as a “failure to launch” (2019), as an individual is unable to live independently and ultimately support a family, not only is the financial burden is passed to others, but the opportunities that come with financial stability are lost. With a larger percentage

5 of Black Americans carrying student debt than other races, a racial wealth gap - and a serious imbalance in financial power - is created due to an imbalance in accumulation. Perpetuating itself further, Black students and families tend to rely on student loans and financial assistance in order to pursue post-secondary education (Jones et al., 2020). Due to the sheer number of people impacted by student loan debt, it is a prime example in the case for a debt jubilee. Herrine argues that to cancel student debt would remove enormous financial strain from individuals, stimulate communities, investments, and largely support disadvantaged populations (2020). With hundreds, potentially thousands of dollars freed from debt repayments each month for an individual, that money will instead go back into the economy. This logic can also be applied to debt on a larger scale. As discussed earlier, many federal governments, including Canada, carry enormous debt that can never be repaid. If small, deeply indebted countries had the opportunity to have debt written off, their financial power would expand in ways that could support their citizens and economics growth. Sosteric makes his belief abundantly clear in Rocket Scientists’ Guide, that the only solution to the problems created by capitalism, is to erase them with a debt jubilee. Herrine would agree, and add that this must be paired with policy changes in the value of labour and the way wealth distribution is organized in order to create a system that is more fair and benefits a wider contingency of people (2020). “Money is the root of all evil” is a common saying, though the actual quote is from the Bible and states “the love of money is the root of all kinds of evil” (New Living Translation Bible, 2004, Timothy 1:6). In saying this, people are missing what Sosteric would argue is crucial context: the love of money is what is “evil”, and the desire and ability to accumulate it

6 without limit is what is damaging. The truth of this is made abundantly clear in Rocket Scientists’ Guide in a simple and critical manor: a global debt jubilee and the elimination of accumulation economies is the only way to save the world from catastrophe (2016). A seemingly simple solution with historical roots, it has been nearly six years since Sosteric wrote those words, and we can only hope that the rest of the world catches on soon to what must be done.

7 References A. (2004). Holy Bible: New Living Translation. https://biblehub.com/nlt/1_timothy/6.htm Easterly, W. (2001). Debt Relief. Foreign Policy, 127, 20–26. https://doi.org/10.2307/3183290 Fraser Institute, Fuss, J., & Lafleur, S. (2021, February). The Growing Debt Burden For Canadians: 2021 Edition. https://www.fraserinstitute.org/sites/default/files/growing-debtburden-for-canadians-2021.pdf Herrine, L. (2020). The Law and Political Economy of a Student Debt Jubilee. Buffalo Law Review, 68, 281–411. https://doi.org/10.2139/ssrn.3442234 Hudson, M. (2020, March 21). A debt jubilee is the only way to avoid a depression. Washington Post. https://www.washingtonpost.com/opinions/2020/03/21/debt-jubilee-is-only-wayavoid-depression/ Jones, T., Jackson, V., & Mendoza, J. R. (2020). Borrowing while Black: Understanding what makes student debt a crisis for black students. Liberal Education, 106(1–2), 14. https:// eds.s.ebscohost.com/eds/pdfviewer/pdfviewer?vid=5&sid=5ea33010-df46-414cb0af-1f734fdc218a%40redis Miller, Z. (2018, December 3). 12 of the biggest differences between attending a university in the US and in Canada. Insider. https://www.insider.com/college-canada-usdifferences-2018-11#college-is-much-pricier-in-the-us-than-in-canada-2 Sosteric, M. (2016). The Rocket Scientists’ Guide to Money and the Economy: Accumulation and Debt. Avatar Publications. The Institute for College Access & Success. (2019, April). Quick Facts About Student Debt. https://ticas.org/files/pub_files/qf_about_student_debt.pdf

8 U.S. Census Bureau. (2021, October 8). COVID-19 Adds to Economic Hardship of Those Most Likely to Have Student Loans. Census.Gov. https://www.census.gov/library/stories/ 2021/08/student-debt-weighed-heavily-on-millions-even-before-pandemic.html...