V. Discipline of Debt

Throughout history, debt both lubricated circuits of value extraction and acted as a disciplinary device. From Athenian debt-bondage to contemporary labor trafficking, debt-peonage has been part of labor management regimes across a variety of modes of production. The historical role of debt in moral discipline is evidenced by the fact that in all Indo-European languages, words for debt are synonymous with those for sin or guilt. Debt has also played a foundational role in modern imperial *42 domination. During the colonial era, colonial powers often intervened militarily to enforce debt contracts. After decolonization, conditions accompanying international credits were deployed to control public policies of post-colonial formations. The recurrent international debt crises of the last three decades were used to enforce neoliberal restructuring of economies of debtor states. Debt levels of corporations unavoidably tend to discipline the employment relationship as firms with higher debt reduce their payroll, use more part time employees, pay lower wages, and have anemic pension plans. The disciplinary impact of debt in all these instances issued from direct coercion and/or express provisions of debt contracts. What is distinctive about the neoliberal era is the self-discipline of debtors procreated by governmentalities that are unencumbered by direct coercion or express undertakings.

In the perennial search for effective modes to contain and control the dispossessed, debt surfaced on the agenda of American ruling classes at least as early as the early 1900s. In particular, home mortgage was advocated as an effective tool of social control, indeed, a “prophylactic against mob mind.” As organized labor took roots, captains of industry recommended that workers should be induced to “invest their savings in their homes and own them. Then they won't leave and they won't strike. It ties them down so they have a stake in our prosperity.” While a beginning was made along this agenda during the Keynesian era, neoliberal financialization dramatically expanded the scope and reach of credit in general and mortgage-driven home-ownership in particular. Neoliberalism opened up new frontiers for the disciplinary operations of debt: self-discipline by indebted masses engulfed by the financialized economy and refashioned governmentalities.

Neoliberal economic policies and an attending discourse of personal responsibility furnished the grounds for the symbiosis of debt and discipline. Neoliberal rationality aims at congruence between a responsible and moral individual and an economic-rational actor: a prudent subject whose moral quality rests on rational assessment of economic costs and benefits of their actions. The prescription of subjectivity to obtain interiorization of the market's goal in the context of precarization of labor is accomplished *43 through generalization of debt. The result is an assemblage that “accepts” itself as a homo economicus, “a dependent subjectivity, a subjectivity conforming to capital, and in which the rationality of homo economicus, of human capital, replaces the idea of social rights and common goods.” This ensures self-discipline whereby time and life both within and outside the bounds of any specific site of production remain subjected to value production.

Neoliberalism fashioned “workfare regimes” intended to “throw a long shadow, shaping the norms, values, and behavior of the wider population, and maintaining a form of order.” Evocatively styled, the Personal Responsibility and Work Opportunity Act of 1996, ended “welfare as we know it” and instituted “workfare”: forced deskilled wage labor as the sole means of support on the pretext of setting the indigent on the road to “independence.” Similarly, the Quality Housing and Work Responsibility Act of 1998 radically reduced public housing and turned the indigent towards private rental markets. Workfare underscored the imperative of wage labor by issuing “a warning to all Americans who are working more and earning less, if they are working at all. There is a fate worse, and a status lower, than hard and unrewarding work.” The new behavior-related rules of workfare aim “to build habits of responsible behavior.” “Stripped *44 down to its labor-regulatory essence,” workfare seeks “to make ‘docile bodies' for the new economy: flexible, self-reliant, and self-disciplining.”

Under neoliberalism, responsibilization emerged as the dominant register of subject-formation. Responsibilization turns on the ubiquitous neoliberal construct of “human capital.” Through the lens of human capital, wage is not the selling of labor power but an income from a special type of capital. This capital is integral to the person who possesses it and consists of both physical predispositions and the skills acquired as a result of “investments” in education, training, and physical capacity. This focus on predispositions and acquired capacities raises troubling questions of race, genetics, family, and class. In the “human capital” discourse, a human being is deemed a “machine-stream ensemble,” a “capital-ability,” indeed “a machine that produces.” This actively responsible agent is a subject of the market and is obliged to enhance her quality of life through her own decisions. In this schema, everyone is an expert on herself, responsible for managing her own human capital to maximal effect. A politics of the self emerges wherein we are all induced to “work on ourselves” outside the purview of the social. This biopolitical governmentality produces a subject to represent herself as enough for herself, complete and self-*45 sufficient: a “narcissistic separation of living labor from the public sphere . . . [where] labor becomes individual business and/or human capital.”

As welfare safety nets are removed, workers are induced to think of themselves as free-standing businesses that shield themselves, much as corporations do, by measuring and apportioning risks and by diversifying operations and investments. Indeed, cheerleaders of neoliberal globalization are rather explicit: “We're all entrepreneurs now, or should be.” Risk, which was deemed harmful and needed careful calculation and management by actuarial experts, is now represented as an opportunity to be negotiated, cultivated, and exploited by the entrepreneurial financial subject. Ideologues of neoliberalism warn against “diffusing, equalizing, concealing, shuffling, smoothing, evading, relegating, and collectivizing the real risks” and argue “with more of the risks borne by the individual citizens . . . the overall system may be more stable.” This assemblage of the risk-taking entrepreneur is facilitated by attendant discourses of rational economic actors, efficient and self-correcting markets, and the ostensibly tamed business cycle. This calls forth a particular subjectivity by demanding that individuals increasingly act as entrepreneurial investor subjects as part of a wider individualization of risk. In this schema, “a personal loan was taking responsibility for life's uncertainties.”

*46 With the neoliberal call for individuals to secure their freedom, autonomy and security through financial markets and not the state, practices of investment, calculation and speculation became signs of initiative, self-management, and enterprise. Neoliberal economic theory rests on the notion of the “‘rational individual,’ a fantastic creature that aims exclusively at private gain, has no altruism and strictly calculates the necessary means to achieve desired ends.” Eliding the fact that much of human behavior is irrational, neoliberalism expects individuals to rationally evaluate risk. Indeed, in the neoliberal ensemble, “risk itself is being more positively evaluated,” with the result that “investment appears as the most rational form of saving.” In the assemblage of investor/entrepreneur subjectivity, “[w]ithout significant capital, people are being asked to think like capitalists.” The consolidation of finance as a way of life introduces “a new set of signals . . . as to how life is to be lived and what it is for.” Everyday life is increasingly framed as a space of investment, and the individual is positioned as an investor in a life project to continuously pursue opportunities and negotiate risks in the expectation of rewards. One is engulfed by information about finance in the news media, particularly the ubiquitous stock market ticker-tape on television, that “breathe[s] life into finance, turning it into a living organism.” Tying everyday practices to global financial networks-retirement plans, pensions, purchase of goods on credit, repayment of credit bills, credit cards, student loans, and mortgages-induces the self-fashioning of financial subject *47 positions and identities. In this context, finance becomes “a way of working money over, and ultimately, a way of working over oneself.” Finance, then, by constituting a primary frame of interpellation of subjectivity, became a primary “technology of the self,” and financialization becomes “a practice of social control. . . . compatible with democratic societies where order is based on the formalized participation of great masses.” The “command devices” of this practice exist in “the hybrid zone where the political economy meets social psychology.” In the wake of the displacement of the welfare state by neoliberal reordering of the economy, personal well-being and financial security becomes increasingly bound up with the fortunes of the international financial markets through pensions, mortgages, and stocks. The result is inescapability of finance as everyday life becomes increasingly financialized. It leads individuals to believe that their well-being depends more on financial markets than on demands for higher wages and claims on public resources. In this context, to be a leveraged mortgage debtor is to be a responsible and self-disciplined entrepreneur.

The Keynesian productivity-wage and production-mass consumption connections are substituted with a debt-consumption connection driven by the so-called wealth-effect, an evocative instrument of this mode of control and discipline. The wealth-effect is tied to the emergence of “an asset economy,” which, in turn, results in a “‘patrimonialization’ of behaviors.” The wealth-effect, “a sort of illusory social insurance for the crumbling of Fordist social security” induced by increases in asset value, particular stocks, and housing, “affects consumption behaviors more than the expected wealth due to an increase in wages.” Indeed, debtors often harvested the wealth-effect, further fueling aggregate demand: cash-out volumes for all prime conventional loans amounted to $26 billion in 2000 *48 and reached $318 billion in 2006. In effect, the working classes “used asset-growth to substitute for wage-growth.”

In this context, for the risk-taking entrepreneurial subject, borrowing and living with debt appear both essential and rational. Living with debt, however, is living in a “credit panopticon,” with disciplining effects both at the inception of debt and through its career. The disciplinary controls of standardization and synchronization exercised through the “credit panopticon” displace trust as a grounds for lending. Critical to note here is that credit scoring did not aim at exclusion of deviants but provided the grounds for inclusion and differentiation in mortgage lending, a development critical for reverse redlining. Credit scoring knowledge produced debtors sorted, targeted and governed through the prism of risk-based pricing. It also produced new forms of responsible and entrepreneurial self-discipline and mortgagors as leveraged investor subjects. In this context, charging higher interest rates to racial minorities became seemingly rational and above political questioning. Finally, the subprime mortgage market partook of the benefits of the neoliberal phenomenon of responsibilization of entrepreneurial self, whereby individuals were induced to provide for *49 their own freedom and security through opportunities offered by the market.

The marketing of credit is built around the time-and-space-specific constructs of the “normal” consumer held within financial institutions. These normative expectations inform profiles of consumers including embedded understandings of normalcy and deviance. Therefore, in order to qualify for debt, a borrower has to demonstrate subscription to such standards of normalcy. Internalizing such constructions of normalcy, debtors who use credit disproportionately “feel affluent” and think of themselves as “ordinary.” Once indebted, debtors become subjected to normalization by debt and are less likely to claim nonconformist views or indulge in nonconformist conduct. It was noted as early as the 1920s that debt-encumbered homeowners are less likely to go on strike. Later, during the neoliberal era, Greenspan echoed that the more debts workers have, the less free they are to strike. Conformity with rules of the new financial and labor markets renders the debtor a responsible subject called forth by neoliberalism. Thus disciplined, the atomized and self-sufficient *50 subject of the market becomes incompatible with projects of solidarity, collective rights, and anti-subordination.