“Did you know that approximately 3 million Australians – around 16.9% of the adult population – are either fully or severely excluded from obtaining credit from the banks?” So asks the peak body representing Australia’s payday lenders as part of their Small Loans Big Need campaign.
Debtfare states and the poverty industry provides a timely corrective to this rhetoric of “financial inclusion”, which seeks to recast poverty as a problem of underdeveloped consumer credit markets. The award-winning book seeks to “pierce this fetishised surface to grasp that consumer credit is not only infused with class-based power, but also structural violence and silent compulsions.” With the aid of a historical materialist framework, Susanne Soederberg powerfully demonstrates how movements by capital and states to create financial equality in credit markets simultaneously exacerbate and conceal class, race and gender inequality through the “social power of money.”
Soederberg offers an account of the rise of the poverty industry by developing Marxist understandings of consumer credit as “privately created money” and the marginalised workers that that depend on it as the “surplus population.” This grounds detailed case studies of the payday lending, credit card and student loan industries in the United States, as well as the microfinance and housing finance industries in Mexico, within the contradictory dynamics of capital accumulation.
According to Soederberg, these types of debt are critical to the reproduction of the unemployed and underemployed workers that make up the surplus population because repayment obligations intensify the compulsion for debtors to work in low paid jobs. The private creation of money also provides direct opportunities for the poverty industry to profit from the “secondary exploitation” of already-exploited workers by charging often exorbitant interest rates, fees and commissions.
Debtfare states illuminates a fundamental tension between these two components of a credit-led accumulation strategy based on the commodification of social reproduction: consumer credit is a “fictitious value” that is based on a “risk/gamble” on the future earnings of workers that have a precarious relationship to the labour market. Asset-backed securitisation provides a temporary “fix” for creditors by bringing forward these income streams. But ultimately, as David Harvey via Soederberg reminds us, “no matter how far afield a privately contracted bill of exchange may circulate, it must always return to its place of origin for redemption” – that is, to the repayments of the debtor.
Enter “debtfare states”, a concept that represents the most innovative, original and important contribution of the book. Meticulous empirical work demonstrates the crucial role of institutional, regulatory and rhetorical strategies by public authorities in the United States and Mexico in mediating tensions between the requirements of privately created money and the conditions of the surplus population. Debtfare states have boosted profit rates for the poverty industry through actions such as lifting interest rate caps while working to ensure repayment obligations are met, for example by amending legislation to make bankruptcy out of reach for the surplus population. When states have acted in response to public outcry or financial crisis, this has been limited to consumer protection efforts that seek to enhance transparency and disclosure in order to provide consumers with the information they need to make rational decisions.
Between the different credit markets and geographical locations covered in the book, it is commonality in state policy, rather than variegation, that stands out. The modus operandi of debtfare states is to naturalise debt and discipline the debtor while depoliticising the underlying causes of indebtedness: below living wages, inadequate pensions and unemployment benefits and the marketisation of public services.
From the vantage point of the Department of Political Economy’s Past & Present reading group at the University of Sydney, it is clear that debtfarism has become a central component of Australian public policy. State-issued student debt has underpinned the privatisation of the vocational education and training system, which has been sold by successive Australian governments as extending access to income-contingent loans to a new layer of students. Through its international aid program, the Australian government has also been focused on extending access of the big banks to Pacific Island communities by teaming up with Westpac and ANZ to “bank the unbanked.”
Debtfare states makes valid criticisms of post-structuralist scholars, such as Andrew Leyshon and Paul Langley, for reproducing this financial inclusion discourse by remaining in the sphere of exchange. However, the rich analysis of the intertwining relations between the spheres of production and exchange is at times limited by a tendency to assert Marxist categories in an a priori fashion. For example, Soederberg clearly distinguishes between credit advanced for personal consumption as the “money-form of revenue” and credit advanced for private investment as “fictitious capital.” But efforts to leverage and risk manage skills, in the case of student loans in the United States and Australia, and communities, in the case of microfinance in Mexico and the Pacific, raise interesting questions about whether the capital relation itself is being transformed by debtfarism, and how conceptual distinctions between production and exchange may also need to change with it.
Soederberg’s study of the rise poverty industry nonetheless makes a significant step towards an expanded conception of class relations in contemporary capitalism that accounts for the integral role of finance in social reproduction. Its contribution to state theory through this opens up an important research agenda into debtfare states as a terrain of class struggle.
Indeed, the campaign by the Australian payday lending industry, which has been challenged in the past year by class actions and media exposés, shows that debtfarism is a contested process that remains politicised. That states continue to frame the problem as one of market failure was typified by a recent penalty imposed by the financial regulator ASIC on pay day lender Nimble for irresponsible lending practices, which required the online operator to donate $50,000 towards financial literacy programs. In this context, Debtfare states and the poverty industry provides an essential resource to understand, and question, individualised solutions to poverty.