This article is about criticism of, and arguments against debt.

There are many arguments against debt as an instrument and institution, on a personal, family, social, corporate and governmental level. Usually these refer to conditions under which debt should not be used as a solution, e.g. to fund consumption for survival. Consumer debt and public debt deal with some of these issues.

Contents

1 Economics 2 Religion 3 Feminism 4 Environment 5 See also

Economics

Some theories of economics argue that debt is itself a problem, and should not be the foundation on which contracts are made between persons, organizations and nation-states. Those theories that hold it as wholly undesirable are often called creditary economics, and are also often related to theories of economics that look more basically at fundamental scarcities: clean air, clean water, safe food, shelter:

On the other hand, debt instruments (such as bonds or loans) are often seen as means of effective transfer of money from people that have excessive funds to people with productive investment ideas. This lets the economy increase it's efficiency, meaning an increase of the well-being of the whole society. (E.g. an entrepreneur comes to a bank with a great idea and gets a loan, which is one of the debt instruments. He uses the money to develop his idea into a working company, creating products and work places - increasing overall well-being).

The most important practical theory in understanding many aspects of debt is the theory of time value of money, this is the theory that is daily used in finance for comparing one debt instrument to another. It also explains such phenomenas as fluctuation of bond prices with the change in the interest rates etc.

Part of the time value of money theory is the concept of present value and future value used for example in calculating mortgage terms.

Religion

Islamic economics, concerned with the equity of distribution of these things and the potential for unrest if simple luck is permitted to cause some to starve while others prosper, simply for having held a safer debt asset through a catastrophe, has alternative instruments that do not obligate repayment in the sense of debt but instead act as a joint venture type instrument. The justification for this is a hadith which states as a rule of trade: "nothing present for that which is absent". This avoids the problems of the devaluted asset or bad debt becoming a source of unrest later on, should it be devalued or defaulted through no fault of the borrower. Since Allah intends the misfortune to fall on all those involved, the argument goes, to leave the debtor obligated and the creditor with recourse to the state for collection, is to defy God. Christian philosophy is also often concerned with these very issues, and in fact, very similar sentiments prevailed in Christian societies until the end of the Middle Ages.

Feminism

Feminist economics is more concerned with the ultimately coercive nature of debt and the circumstances into which it is entered, and the consequences of having to liquidate one's resources, or even one's body (slavery, prostitution) directly, to repay debt undertaken for consumption - or mere survival. Unequal distributions of force required to collect debt, unequal vulnerabilities to coercive pressures of a society in general, are seen as hopelessly slanted against the female, who is a perpetual debtor, versus the male, who is a perpetual creditor, given the relative masteries of deadly force, and the vulnerability of mothers and the children to which they are closely bonded: debt bondage accrues more to women than men, and may even require the sale of children - often for sexual uses by men. Thus, debt simply reflects patriarchy, and even such female-friendly schemes as Grameen Bank are suspect because they are ultimately seeking to get women to "perform" in an economic system that is defined by, and for, men, for male desire.

Environment

Green economics makes an argument from ecology: the ecological yield of natural capital is quite limited by current solar income and other factors, such as water, topsoil, shade, nutrients and pollination. Nature's services only restore the capital so fast. Any interest rate greater than this nature rate of restoration necessarily obligates debtors to deplete the capital reserves of nature, and thus the services themselves, simply to repay the cash debt. This race to the bottom is exacerbated by competition - thus the slowest-recovering systems are forced to depletion even faster by "need" to compete with faster-recovering ones which have a higher yield and thus likely receive more attention from the exploiter. Even an interest rate less than the rate of depletion, charged on the land or rights of access, can lead to disaster if there is a high capital cost and thus equipment depreciation to repay. A particularly cogent example is fishery and forestry which are increasingly dependent on high-tech machines, creating fewer jobs, but depleting more fish stocks and forests, simply to repay the debts on equipment, which is ever more sophisticated. Thus, debt-financed infrastructural capital is analogous in this view to weapons: their only service is to compete, threaten and ultimately destroy all value in the long run. They do not "produce" on any kind of sustainable basis. The availability of debt itself to finance these machines and technologies is a problem, and not just of economics.

See also

Debt