Peter Gustafson, June 2009

Margaret Atwood, Payback: Debt and the Shadow Side of Wealth (Anansi, 2008; Massey
Lectures, Toronto).

As a consumer bankruptcy lawyer for the past ten years, I have occupied a front row seat from which to observe the emergence and aftermath of the “sub-prime mortgage” phenomenon and the associated feeding frenzy fueled by inflated real estate values. When the real estate market was thriving, large numbers of U.S. citizens bought houses as “investments” or cashed out the equity in houses to enable themselves to spend money. These choices concerning real estate usually went hand-in-hand with a liberal use of credit cards and, typically, the debt-financed acquisition of sport utility vehicles.

I have worked with two basic types of people. In most cases, I have worked with decent ordinary people who bought houses without adequate financial means to make mortgage payments, particularly when “adjustable rates” jacked up the size of payments. These people are often now in foreclosure. I have also worked with vulture types who sought to get rich by investing in Phoenix, Arizona real estate – a hyper-reality of faceless housing units on sun-scorched earth — and now face financial collapse. To take a typical example of the latter, an “investor” bought five houses in 2005 and 2006, renting them out for a time, thinking he would sell them for a killing as the market rose. The cities of Surprise, Anthem, and Queen Creek, Arizona, which typify the Phoenix fringe, are defining sites of the phenomenon. When the market collapsed, the investor turned to credit cards to pay his mortgages, rental income always being inadequate to the task, hoping to hang on. He now has $150,000 in credit card debt, five houses in foreclosure, and a 2006 Ford Expedition bloated by $25,000 of secured debt.

Margaret Atwood’s Payback is one of the best commentaries in print on the significance of the current financial crisis. Her subject is how the crisis is forcing people to re-think the meaning of debt. Atwood, supremely literate, has the rare quality of perspective. Unfortunately, she makes, in this case, inadequate use of her literacy.

First, a sketch of Atwood’s book.

Context: unprecedented levels of debt, individual and collective. The reality and the prospect of financial collapse. “…the financial world has recently been shaken as a result of the collapse of a debt pyramid involving something called ‘sub-prime mortgages’ – a pyramid scheme that … boils down to the fact that some large financial institutions peddled mortgages to people who could not possibly pay the monthly rates and then put this snake-oil debt into cardboard boxes with impressive labels on them and sold them to institutions and hedge funds that thought they were worth something.” p. 8.

Chapter 1, Ancient Balances. The notion of equivalent values, each balancing the other, as an imaginative construct in human thought; fear and desire; debt and reward; servitude and freedom. The “innate human module that evaluates fairness and unfairness and strives for balance.” “Debtor/creditor twinship.” p. 162.

Chapter 2, Debt and Sin. Financial debt as a metaphor for sin. “In a [small community] everyone knows your business. A good reputation [is] very important.. nobody [wants] to be known as a person who [does] not repay.” pp. 48-49. Christian notion of original sin, built-in debt, creditor as death or Devil. Imbalance between debtor and creditor makes both sinful.

Chapter 3, Debt as Plot. Debt can constitute a story-line for life. Using debt to spend and acquire can relieve boredom. “Rats, if deprived of toys and fellow rats, will give themselves painful electric shocks rather than endure prolonged boredom …. rats will do almost anything to create events for themselves in an otherwise eventless time-space.” p. 83. Paying off a mortgage as a form of purpose in life. The “life game” between debtors and creditors of “try and collect.” Faust as Scrooge in reverse.

Chapter 4, The Shadow Side. “The Shadow is our dark side, the repository of everything in us we’re ashamed of and would rather not acknowledge, and also of those qualities we profess to despise but would in fact like to possess.” p. 150. What happens when people don’t pay their debts? Revenge, punishment, seizure of assets, guilt, shame, humiliation, disgrace, revolution, destruction of records/memory, a pound of flesh, bankruptcy. Forgiveness?

Chapter 5, Payback. What happens when debit and credit balances get further out of control? Pay-up time. Final reckoning. Due date. Time as a condition of life. Death as a means of payback. Responses to the Black Death. Look out for yourself and run away. Live for the moment and have fun. Attack and kill. Be altruistic — do what you can to help the neediest. These are the only possible reactions. p. 186. Plague as a means of wiping the slate clean. Extinction. Think differently. Calculate the real costs of how we have been living. Maybe.

Atwood’s thesis is that the current financial crisis is prompting a turnaround in our perspective on debt, from the notion that debt (credit) is a good or at least neutral thing, the “shadow side of wealth,” (“indispensable to our collective buoyancy.” – p. 9) to the notion that debt is bad, a stain on one’s identity (“debt is the new fat” – p. 41). Fair enough. Perhaps true empirically. But what is the significance of the point? The important issue is not how we in fact view debt, but how we ought to view debt, that is, how we ought to view debt in a modern mass society. Should a decent ordinary person conceive of debt (credit) as the vulture does, as a morally neutral thing to be taken advantage of if necessary? I believe that, in a qualified sense, the answer is yes. I have not adequately reflected on why I support this proposition. My gut tells me, however, that, if qualified, the proposition is true.

In ten years of consumer bankruptcy law practice, I have come to believe that for most people, bankruptcy (“debt restructuring”) is morally justified or morally neutral, not something drastic or morally pregnant. Bankruptcy, in a credit-driven mass economy, is, for most, as morally significant as a visit to a dentist. It is definitely as common as a visit to a dentist. Arizona citizens filed more than nineteen thousand (19,157) bankruptcy cases in the year 2008. (Incidentally, marital dissolution petitions filed in the Maricopa County Superior Court between July 2007 and June 2008 numbered 18,279, a suggestive parallel.)

The real issue is the meaning of moral agency, that is, the meaning of moral agency as a debtor, in a modern mass society, in which most debt is owed not to a locally-owned credit union, a lender down the street, but to Bank of America, JPMorgan Chase, Wells Fargo Bank, or similar institutions of a vast, impersonal “megamachine,” to use Lewis Mumford’s apt term (The Myth of the Machine). One of the best starting points for reflection here is moral philosopher Derek Parfit’s Reasons and Persons (1984). Parfit seeks to restructure thinking about moral agency in the following terms.

Premise: “Life in big cities is disturbingly impersonal. We cannot solve this problem unless we attack it on its own terms. Just as we need thieves to catch thieves, we need impersonal principles to avoid the bad effects of impersonality.” p. 444. “…the effects [of actual cases] on others are trivial or imperceptible. We mistakenly believe that, because this is true, the effects of our acts cannot make them wrong. But, though each act has trivial effects, it is often true that we together impose great harm on ourselves or others.” id. (pollution, over-fishing, overpopulation, etc.) “The false beliefs [of common sense morality] did not matter in .. small communities.. in these communities, we harm others only if there are people whom each of us significantly harm…” Most of us now live in large communities. The bad effects of our acts can now be dispersed over thousands or millions of people.” id.

General Thesis: “Common sense morality must be revised.” “Our reasons for acting should become more impersonal … [it is a mistake to think that] the only relevant effects are the effects of this particular act … [this mistake] leads people to ignore what they together do. … most of us [mistakenly] believe that if some act has effects on others that are trivial or imperceptible, this act cannot be morally wrong because it has these effects.” p. 443. “why care especially about the person that is oneself, …why care especially about oneself as opposed to other persons?” “It is not enough to ask, ‘will my act harm other people?’ …. I should ask, ‘will my act be one of a set of acts that will together harm other people?” p. 86.

This gets to the nub of the matter. One central implication is as follows. To make a move to “impersonality,” (or in Brian Barry’s better term, “impartiality” – Justice as Impartiality) and dislodge ourselves from common sense morality, is to maintain that common sense morality can be a dead weight – a form of blindness — as well as a standard of good conduct. The morality between Jane Doe and Jane Banker-Down-the-Street is empirically out of touch. It is therefore inapt to restrain one’s relations with a Bank of America by such thinking. Stated differently, to employ Mumford’s terms, the moral relation between the individual and the megamachine is fundamentally different than the moral relation between two persons who live in face-to-face community.

From an impartial stance, how ought we to view (a) obtaining money on credit from an institution of the megamachine and (b) using bankruptcy law to discharge the debt that results? Mumford wrote about making “selective use” of the megamachine. That is suggestive. Going into debt to a Bank of America, making instrumental use of a Bank of America, is morally distinct from going into debt to one’s neighbor down the street, a fellow citizen. As noted, qualifications are necessary. Selective use is not indiscriminate use. It is not use to buy a motor boat to race on Lake Powell. Selective use would include, to cite an easy example, using Bank of America debt to feed one’s children after a job layoff by Wal Mart. More challenging examples are, for example, incurring Bank of America debt

to make charitable donations to Bread for the World;
to pay for medical care;
to help sustain a family farm;
to pay for college education;
and so on.

The point of these examples is to propose that one think about debt, as about other matters, in a way that universalizes the principle or purpose of personal conduct. The proposal is to think of individual economic conduct as a citizen would think of it; to think of an individual debtor not as an isolated unit in a disaggregated economy, but as a member of a political community.

Atwood provides a majestic survey of Western attitudes towards debt, but in the end, her survey operates mainly as a substitute for thought.