Creditocracy
"I use Mastercard to pay Visa."
- bumper stickerabout the bookabout
Creditocracy (n.)
1. governance or the holding of power in the interests of a creditor class
2. a society where access to vital needs is financed through debt
It seems like pretty much everybody - homeowners, students, those who are ill and without health insurance, and, of course, credit card holders - is up to their neck in debt that can never be repaid. 77% of US households are seriously indebted and one in seven Americans has been pursued by debt collectors. The major banks are bigger and more profitable than before the 2008 crash, and legislators are all but powerless to bring them to heel.
In this forceful, eye-opening survey, Andrew Ross contends that we are in the cruel grip of a creditocracy – where the finance industry commandeers our elected governments and where the citizenry have to take out loans to meet their basic needs. The implications of mass indebtedness for any democracy are profound, and history shows that whenever a creditor class becomes as powerful as Wall Street, the result has been debt bondage for the bulk of the population.
Following in the ancient tradition of the jubilee, activists have had some success in repudiating the debts of developing countries. The time is ripe, Ross argues, for a debtor's movement to use the same kinds of moral and legal arguments to bring relief to household debtors in the North. After examining the varieties of lending that have contributed to the crisis, Ross suggests ways of lifting the burden of illegitimate debts from our backs. Just as important, Creditocracy outlines the kind of alternative economy we need to replace a predatory debt-money system that only benefits the 1%.
"Andrew Ross is the very model for a scholar-activist, and Creditocracy, his latest book, is as compelling as it is important. Let's hope this makes a difference in the world. It really should." - David Graeber, author of Debt: The First 5,000 Years
"In this lucid and accessible book, Andrew Ross argues that we are increasingly oppressed by the rule of credit and that ever more people must go into debt just to access life's necessities. But Ross not only names the problem; more importantly, he points toward solutions. Read this book and join a debt resistors movement." - Michael Hardt, co-author of Empire
"Andrew Ross's Creditocracy is the middle finger to our economy's debt vultures: he lays out a masterful case that we must tell the creditor class to stick it where the repo man don't shine. Ross is particularly good at picking apart that new form of indentured servitude, the student loan. Creditocracy calls for resistance to our nationwide virtual debtors prison, and it's about time." - Greg Palast, reporter for BBC's Newsnight and author of Vulture's Picnic
About The Author / Editor
Preview
CREDIT CARDS: WHY THE BANKS WANT US TO BE "REVOLVERS" RATHER THAN "DEADBEATS"
(From chapter one of Creditocracy)
[Let's] consider the technique of revolving credit, pioneered in the 1960s with the customer accounts of department stores, adopted thereafter by issuers of credit cards, and now among the most profitable vehicles of consumer lending. Under the terms of revolving credit, users appear to be in control of their own borrowing, and so they choose what they repay on a monthly basis. Credit managers, relying on judgments of "character", no longer vet borrowers or decide on their repayment schedule. They still set credit limits, but are all too happy to mail us a new pre-approved card when we max out (a billion and a half cards are in use in the U.S., almost five for every person). The mental trap set for revolvers is so sweet that, for the most part, we are not aware that when we use plastic for purchases or other payments we are, theoretically, borrowing money from the banks. On the one hand, payback morality demands that we try to make good on the repayments, and also that we take responsibility for the underlying behavior that triggers our failure to make minimum payments. On the other hand, the last thing that issuing banks want to see is their customers clearing their Visa and MasterCard balances at the end of each month. Bankers’ profits depend on the continuous flow of merchant fees and late payment penalties in order to extend the debt indefinitely, and, as users increasingly employ their credit cards to service student, medical, and housing debts, that unbroken revenue stream is a sure thing. With APRs currently around 15%, credit card issuers are collecting $2277 annually from the average debtor (who owes $15,185) in finance charges and penalty fees. This transfer of wealth is a consequence of debtors’ desperation, yet it proceeds in an automatic manner, and behaves as if it were a form of tax collection.
Even the leeway given to users is an illusory choice. As the responsibility for paying for social needs like education, shelter, and healthcare falls more and more on individuals, the private debt-financing of those basic goods is unavoidable and all but mandatory. The state’s withdrawal from its obligation to make their provision affordable means that the revolving credit card has become the operational lifeline for individuals or families struggling to keep their heads above the water. They may want, or intend, to pay the monthly balance but they usually fail to make ends meet. In the banking industry, these "revolvers" in particular – numbering more than 60% of users – are the commercial sweet spot. They are also the ideal citizens of a creditocracy. By contrast, those who can afford to pay off the balances are known as "deadbeats", who shirk their duties because they get credit for free. There are other market segments, of course, but by far the most sought-out customers are the long term revolvers, as opposed to those who used to be favored because they combined "good character" with the prospect of future financial stability. Today, borrowers who diligently repay in full and have good credit scores are less desirable, though they are effectively being subsidized by the revolvers. To fully thrive, a creditocracy needs a precariat that lacks the wherewithal to make good on its full promissory obligations.
in the media
Related Interest
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Creditocracy
"I use Mastercard to pay Visa."
- bumper stickerabout the bookabout
Creditocracy (n.)
1. governance or the holding of power in the interests of a creditor class
2. a society where access to vital needs is financed through debt
It seems like pretty much everybody - homeowners, students, those who are ill and without health insurance, and, of course, credit card holders - is up to their neck in debt that can never be repaid. 77% of US households are seriously indebted and one in seven Americans has been pursued by debt collectors. The major banks are bigger and more profitable than before the 2008 crash, and legislators are all but powerless to bring them to heel.
In this forceful, eye-opening survey, Andrew Ross contends that we are in the cruel grip of a creditocracy – where the finance industry commandeers our elected governments and where the citizenry have to take out loans to meet their basic needs. The implications of mass indebtedness for any democracy are profound, and history shows that whenever a creditor class becomes as powerful as Wall Street, the result has been debt bondage for the bulk of the population.
Following in the ancient tradition of the jubilee, activists have had some success in repudiating the debts of developing countries. The time is ripe, Ross argues, for a debtor's movement to use the same kinds of moral and legal arguments to bring relief to household debtors in the North. After examining the varieties of lending that have contributed to the crisis, Ross suggests ways of lifting the burden of illegitimate debts from our backs. Just as important, Creditocracy outlines the kind of alternative economy we need to replace a predatory debt-money system that only benefits the 1%.
"Andrew Ross is the very model for a scholar-activist, and Creditocracy, his latest book, is as compelling as it is important. Let's hope this makes a difference in the world. It really should." - David Graeber, author of Debt: The First 5,000 Years
"In this lucid and accessible book, Andrew Ross argues that we are increasingly oppressed by the rule of credit and that ever more people must go into debt just to access life's necessities. But Ross not only names the problem; more importantly, he points toward solutions. Read this book and join a debt resistors movement." - Michael Hardt, co-author of Empire
"Andrew Ross's Creditocracy is the middle finger to our economy's debt vultures: he lays out a masterful case that we must tell the creditor class to stick it where the repo man don't shine. Ross is particularly good at picking apart that new form of indentured servitude, the student loan. Creditocracy calls for resistance to our nationwide virtual debtors prison, and it's about time." - Greg Palast, reporter for BBC's Newsnight and author of Vulture's Picnic
About The Author / Editor
Preview
CREDIT CARDS: WHY THE BANKS WANT US TO BE "REVOLVERS" RATHER THAN "DEADBEATS"
(From chapter one of Creditocracy)
[Let's] consider the technique of revolving credit, pioneered in the 1960s with the customer accounts of department stores, adopted thereafter by issuers of credit cards, and now among the most profitable vehicles of consumer lending. Under the terms of revolving credit, users appear to be in control of their own borrowing, and so they choose what they repay on a monthly basis. Credit managers, relying on judgments of "character", no longer vet borrowers or decide on their repayment schedule. They still set credit limits, but are all too happy to mail us a new pre-approved card when we max out (a billion and a half cards are in use in the U.S., almost five for every person). The mental trap set for revolvers is so sweet that, for the most part, we are not aware that when we use plastic for purchases or other payments we are, theoretically, borrowing money from the banks. On the one hand, payback morality demands that we try to make good on the repayments, and also that we take responsibility for the underlying behavior that triggers our failure to make minimum payments. On the other hand, the last thing that issuing banks want to see is their customers clearing their Visa and MasterCard balances at the end of each month. Bankers’ profits depend on the continuous flow of merchant fees and late payment penalties in order to extend the debt indefinitely, and, as users increasingly employ their credit cards to service student, medical, and housing debts, that unbroken revenue stream is a sure thing. With APRs currently around 15%, credit card issuers are collecting $2277 annually from the average debtor (who owes $15,185) in finance charges and penalty fees. This transfer of wealth is a consequence of debtors’ desperation, yet it proceeds in an automatic manner, and behaves as if it were a form of tax collection.
Even the leeway given to users is an illusory choice. As the responsibility for paying for social needs like education, shelter, and healthcare falls more and more on individuals, the private debt-financing of those basic goods is unavoidable and all but mandatory. The state’s withdrawal from its obligation to make their provision affordable means that the revolving credit card has become the operational lifeline for individuals or families struggling to keep their heads above the water. They may want, or intend, to pay the monthly balance but they usually fail to make ends meet. In the banking industry, these "revolvers" in particular – numbering more than 60% of users – are the commercial sweet spot. They are also the ideal citizens of a creditocracy. By contrast, those who can afford to pay off the balances are known as "deadbeats", who shirk their duties because they get credit for free. There are other market segments, of course, but by far the most sought-out customers are the long term revolvers, as opposed to those who used to be favored because they combined "good character" with the prospect of future financial stability. Today, borrowers who diligently repay in full and have good credit scores are less desirable, though they are effectively being subsidized by the revolvers. To fully thrive, a creditocracy needs a precariat that lacks the wherewithal to make good on its full promissory obligations.