Criticism of debt
Encyclopedia
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. Calls for debt relief
to the developing countries
have been more and more insistent since the 1980s Latin American debt crisis
, and, more recently, the Argentine economic crisis
. Developing countries' debt
has often been qualified as an odious debt
and a mean of neocolonialism
, in particular by "third-worldism" (tiers-mondisme) and the more recent alter-globalization
movement.
in modern economies. Some economists, especially the Austrian school believe that fractional reserve banking should not be allowed and banks should not be allowed to lend money deposited in their accounts by individuals, unless they approve so. Money creation should either be banned (Austrian school) or be a government privilege.
Fluctuations in debt levels are the same as fluctuation in optimism (boom) and pessimism (bust). The middle path is to be advocated at the individual or collective level. In boom times, the debt/GDP ratio rises, this prepares tough times ahead, as sooner or later people are bound to realise that the reality does not match their irrealistic expectations, then they collectively stop to lend and borrow, bankruptcies and debt deflation
follow.
books of Deuteronomy
(23:20) and Leviticus
(25:37) explicitly prohibit lending at interest, and are the source of two of the 613 mitzvot
(Maimonides
#534 & #535), the commands of God
to the Jewish people. According to Proverbs 22:7, "The rich rule over the poor, and the borrower is slave of the lender". NRSV
Christian philosophy
has historically also been concerned with these very issues, and the Catholic Church prohibited lending at interest throughout most of the Middle Ages
. The words for sin and debt are the same in Aramaic, and the Lord's Prayer
can be read as "redeem us from our debts, as we redeem our debitors." The French
philosopher Simone Weil
has argued that debt is evil, because it leads us to the false belief that the past (a promise to pay later for instance) give us right to a certain future (a given money sum at a given date). God wants us to remain in the present, in His presence, so it is supposed that debt is something which moves us away from the feeling of God's instantaneous presence.
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.
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
.
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
Consumer debt
In economics, consumer debt is outstanding debt of consumers, as opposed to businesses or governments. In macroeconomic terms, it is debt which is used to fund consumption rather than investment...
and public debt deal with some of these issues. Calls for debt relief
Debt relief
Debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. From antiquity through the 19th century, it refers to domestic debts, in particular agricultural debts and freeing of debt slaves...
to the developing countries
International development
International development or global development is a concept that lacks a universally accepted definition, but it is most used in a holistic and multi-disciplinary context of human development — the development of greater quality of life for humans...
have been more and more insistent since the 1980s Latin American debt crisis
Latin American debt crisis
The Latin American debt crisis was a financial crisis that occurred in the early 1980s , often known as the "lost decade", when Latin American countries reached a point where their foreign debt exceeded their earning power and they were not able to repay it.-Origins:In the 1960s and 1970s many...
, and, more recently, the Argentine economic crisis
Argentine economic crisis (1999-2002)
The Argentine economic crisis was a financial situation, tied to poilitical unrest, that affected Argentina's economy during the late 1990s and early 2000s...
. Developing countries' debt
Developing countries' debt
The debt of developing countries is external debt incurred by governments of developing countries, generally in quantities beyond the governments' political ability to repay...
has often been qualified as an odious debt
Odious debt
In international law, odious debt is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred...
and a mean of neocolonialism
Neocolonialism
Neocolonialism is the practice of using capitalism, globalization, and cultural forces to control a country in lieu of direct military or political control...
, in particular by "third-worldism" (tiers-mondisme) and the more recent alter-globalization
Alter-globalization
Alter-globalization is the name of a social movement that supports global cooperation and interaction, but which opposes the negative effects of economic globalization, feeling that it often works to the detriment of, or does not...
movement.
Economics
Debt is a major source of money creationMoney creation
In economics, money creation is the process by which the money supply of a country or a monetary region is increased due to some reason. There are two principal stages of money creation. First, the central bank introduces new money into the economy by purchasing financial assets or lending money...
in modern economies. Some economists, especially the Austrian school believe that fractional reserve banking should not be allowed and banks should not be allowed to lend money deposited in their accounts by individuals, unless they approve so. Money creation should either be banned (Austrian school) or be a government privilege.
Fluctuations in debt levels are the same as fluctuation in optimism (boom) and pessimism (bust). The middle path is to be advocated at the individual or collective level. In boom times, the debt/GDP ratio rises, this prepares tough times ahead, as sooner or later people are bound to realise that the reality does not match their irrealistic expectations, then they collectively stop to lend and borrow, bankruptcies and debt deflation
Debt deflation
Debt deflation is a theory of economic cycles, which holds that recessions and depressions are due to the overall level of debt shrinking : the credit cycle is the cause of the economic cycle....
follow.
Religion
The BiblicalBible
The Bible refers to any one of the collections of the primary religious texts of Judaism and Christianity. There is no common version of the Bible, as the individual books , their contents and their order vary among denominations...
books of Deuteronomy
Deuteronomy
The Book of Deuteronomy is the fifth book of the Hebrew Bible, and of the Jewish Torah/Pentateuch...
(23:20) and Leviticus
Leviticus
The Book of Leviticus is the third book of the Hebrew Bible, and the third of five books of the Torah ....
(25:37) explicitly prohibit lending at interest, and are the source of two of the 613 mitzvot
613 mitzvot
The 613 commandments is a numbering of the statements and principles of law, ethics, and spiritual practice contained in the Torah or Five Books of Moses...
(Maimonides
Maimonides
Moses ben-Maimon, called Maimonides and also known as Mūsā ibn Maymūn in Arabic, or Rambam , was a preeminent medieval Jewish philosopher and one of the greatest Torah scholars and physicians of the Middle Ages...
#534 & #535), the commands of God
God
God is the English name given to a singular being in theistic and deistic religions who is either the sole deity in monotheism, or a single deity in polytheism....
to the Jewish people. According to Proverbs 22:7, "The rich rule over the poor, and the borrower is slave of the lender". NRSV
New Revised Standard Version
The New Revised Standard Version of the Bible is an English translation of the Bible released in 1989 in the USA. It is a thorough revision of the Revised Standard Version .There are three editions of the NRSV:...
Christian philosophy
Christian philosophy
Christian philosophy may refer to any development in philosophy that is characterised by coming from a Christian tradition.- Origins of Christian philosophy :...
has historically also been concerned with these very issues, and the Catholic Church prohibited lending at interest throughout most of the Middle Ages
Middle Ages
The Middle Ages is a periodization of European history from the 5th century to the 15th century. The Middle Ages follows the fall of the Western Roman Empire in 476 and precedes the Early Modern Era. It is the middle period of a three-period division of Western history: Classic, Medieval and Modern...
. The words for sin and debt are the same in Aramaic, and the Lord's Prayer
Lord's Prayer
The Lord's Prayer is a central prayer in Christianity. In the New Testament of the Christian Bible, it appears in two forms: in the Gospel of Matthew as part of the discourse on ostentation in the Sermon on the Mount, and in the Gospel of Luke, which records Jesus being approached by "one of his...
can be read as "redeem us from our debts, as we redeem our debitors." The French
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
philosopher Simone Weil
Simone Weil
Simone Weil , was a French philosopher, Christian mystic, and social activist.-Biography:Weil was born in Paris to Alsatian agnostic Jewish parents who fled the annexation of Alsace-Lorraine to Germany. She grew up in comfortable circumstances, and her father was a doctor. Her only sibling was...
has argued that debt is evil, because it leads us to the false belief that the past (a promise to pay later for instance) give us right to a certain future (a given money sum at a given date). God wants us to remain in the present, in His presence, so it is supposed that debt is something which moves us away from the feeling of God's instantaneous presence.
Islamic economics
Islamic economics
Islamic economics refers to the body of Islamic studies literature that "identifies and promotes an economic order that conforms to Islamic scripture and traditions," and in the economic world an interest-free Islamic banking system, grounded in Sharia's condemnation of interest...
, 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
Joint venture
A joint venture is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets...
type instrument. The justification for this is a hadith
Hadith
The term Hadīth is used to denote a saying or an act or tacit approval or criticism ascribed either validly or invalidly to the Islamic prophet Muhammad....
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.
See also
- Debt reliefDebt reliefDebt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. From antiquity through the 19th century, it refers to domestic debts, in particular agricultural debts and freeing of debt slaves...
- Odious debtOdious debtIn international law, odious debt is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred...
- Alter-globalizationAlter-globalizationAlter-globalization is the name of a social movement that supports global cooperation and interaction, but which opposes the negative effects of economic globalization, feeling that it often works to the detriment of, or does not...
- Criticism of fractional-reserve banking
External links
- The Borrowing Mentality vs. The Pay As You Go Approach from Project Worldview