This post is also available in: French
We have all heard by now of Vulture Funds, those that buy cheaply poor countries’ debt, eg, from the IMF or the World Bank, and then pursue the debtor though international courts to force it to pay back in full. The money may come from development loans, or the first surplus in a recovering economy which tends to sink it again in the red. With the European economic crisis Vulture Funds have moved to countries like Greece and Spain.
Less well known is the role of more local Vulture Funds in relation to smaller, personal debt. A Guardian article by Alex Andreou explains why ‘Occupy Wall Street’s debt buying strikes at the heart of capitalism: In buying debt so cheaply and writing it off, Occupy has revealed the illusory and circular nature of owing money’
‘The Occupy Wall Street movement, through its Rolling Jubilee project, bought and scrapped medical bills for more than 2,600 people… with a non-profit initiative which buys personal debt for pennies on the dollar in the secondary market (where debt is sold to companies who then resell it to collection agencies) but then simply cancels it.
‘When the Occupy movement came into being in the summer of 2011, its critics said that a lack of identifiable objectives and strategy for achieving them meant it was doomed to fail. This was a monumental underestimation of its potential impact. Two years on, the debate about the ethics of corporate capitalism in its current form, the fairness of the remuneration of those at the top, the widening wealth gap and the morality of tax avoidance is alive and well. The concept of the “99%” is now part of the collective consciousness. All this is, in no small part, down to the fuse lit by the Occupy movement.
‘However, another significant aspect of the movement – dismissed as being woolly – was that it brought like-minded people together and allowed a dialogue which identified common strands. This appears to have evolved into several focused and practical initiatives. One of the most significant, and perhaps the most threatening to the status quo, is the Strike Debt group, of which the Rolling Jubilee project forms part.
‘The idea is that, those freed from debt and those sympathetic to the movement, then donate into the fund to keep it “rolling” forward; hence the name. The fund has already raised $600,000 and has used $400,000 of this to purchase and cancel an astonishing $14.7m of debt, primarily focusing on medical bills. This strikes at the very heart of the system, not only by using its own perverse rules against it, but critically by revealing the illusory and circular nature of debt…
‘…David Graeber, one of the original members of Occupy Wall Street writes: “[A]lmost immediately we noticed a pattern. The overwhelming majority of Occupiers were, in one way or another, refugees of the American debt system … The rise of OWS allowed us to start seeing the system for what it is: an enormous engine of debt extraction. Debt is how the rich extract wealth from the rest of us, at home and abroad.” Western capitalism is running out of serfs, slaves, colonies, immigrants, child labour and women as chattels. A new underclass must be created. Debt is the weapon of choice. Medical bills underlie more than 60% of bankruptcies in the US. The level of student debt has reached an eye-watering $1.2tn.
‘This is why the debate on the back-door privatisation of medical and education services in this country matters so much. The extraction of profit from these two key areas changes the social contract in a fundamental way. The idea is no longer that the state will educate you and keep you healthy, so that you may continue to contribute with both your work and your taxes. It has mutated instead into “you will borrow money from the state’s private partners in order to become educated and stay healthy, so that you may continue to contribute to their bottom line”. All of the 99%, in a very real way, work in part for an assortment of financial institutions, largely invisible and certainly unaccountable.’
Important issues emerge from this analysis
. The financial institutions to which people are indebted are capable of nearly writing off debt, recovering sometimes less than 10% of its value without much evidence of harm to themselves.
. The debt collection industry has developed on the back of the rigidity of those lenders unwilling to help debtors refinance or reorganise their debt. The present campaigns to denounce the obscene usury of some of such lenders and attempts by the Church and Unite trade union to establish a system of lending that is more compassionate and affordable sometimes fail to highlight that this austerity (but only for the less well off) new world is forcing more and more people to enter into debt just to make end meet.
. Occupy chose to focus on debt created by medical bills in the US. As the drive to privatise the UK’s National Health Service continues to bulldoze its way through conflicts of interest in Parliament and a media campaign to rubbish the existing system, it is important to take heed of this little snippet of things to come, courtesy of the US health system.
. Could debtors see here a way to help themselves? Could they form a debtors co-op to buy debt cheaply and then write it off? They would have to compete, of course, with the little vultures that would not be happy to let go of their produce-nothing profit making business, and also there would be a need to develop a spirit of solidarity since nobody would know before hand whose debt is being written off, but that in itself would be the beginning of change for the ruthless economic system we inhabit today.