Some Quick Thoughts on the Notion of a Debtors’ Strike

Sarah Jaffe has a story at Alternet about kick-stopper, one of the four winners at a conference hosted by Douglas Rushkoff’s ContactCon.  Kick-stopper is a program being created to try and coordinate debtors’ strikes, especially student debt strikes.  You should check it out.

I also noticed, in this Nation story by Gordon Lafer that student debt strikes are mentioned in passing: “If the movement moves beyond the occupied squares and into foreclosure defense (as has already begun in Los Angeles and New York) and student debt strikes…”

To expand on Jaffe’s article, there’s two large, interesting problems with debt strikes, student loan strikes in particular, that I’d like your opinions on.  The first has to do with the opponent’s enforcers.  Let’s put up an image of the Pinkerton National Detective Agency escorting scabs across strike lines in Buchtel, Ohio, 1884:

You can bet if you were fighting against management and got in their way you’d be lucky to just get the butt-end of one of those rifles in your nose.

But let’s go beyond that.  Let’s say, instead of the butt-end of a rifle in your nose, if you fought management the Pinkerton Boys could walk – wait, walk isn’t the right word, teleport instantaneously – to every potential source of credit you could get and tell them to lock down.  Then they go to every single employer in the country, and flag you as someone they shouldn’t hire.  Then let’s say they could teleport to every insurance company in the company and tell them to start charging you and other strikers more money.  And, why not, they zoom over to every utility company in the country, and get them to start demanding deposits and higher rates for things like gas and electricity in the homes of those who are trying to strike.

The Pinkerton Agency couldn’t do that, but the algorithms floating behind the credit reporting agencies can.  And credit reports are one of the things that debt strikers would have to face down in order to make these strikes work.  As the think tank Demos pointed out in their recent report, Discrediting America, credit reports have had “mission creep” so that those reports factor into employment, insurance and utility decisions even though there is little empirical basis to justify this broad sharing and use of personal credit information.

I have a few quotes in Jaffe’s piece, including this one:

Konczal warned that it’s also very hard to win a battle with the government, which backs the student loans even if they are held by private banks. “The way game theorists think about bargaining is that it’s very important to understand how patient each side is. The side that’s more desperate will lose out. In theory the government has an infinite amount of patience. It has no kind of fidicuary cash logic, it also has people with guns and boots and jail cells and the ability to literally take out of your paycheck,” he told me.

There’s something important to realize about the other side in a student debt strikes, and it’s the flip of the advantages of the State for social democrats.  Social democrats like the State to provide certain goods because it has powers and abilities that the private market doesn’t.  Take single-payer health insurance. When it comes to providing health care the social democratic government has compulsion (everyone has to get health care and pay for it out of taxes), an indefinite timeframe (those who pay in early will be certain it’ll be there when they are old), no cut-throat profit motive (so costs can be contained, patentable information shared, pre-existing conditions ignored and health care universalized).

Interestingly, those same abilities are put into play in the nightmare scenario where the State is acting as the ultimate debt collector instead of the legal framework where debts are managed, as it does for student loans.  It gets to have compulsion (loans will be repaid out of whatever income the State can see), an indefinite timeframe (it can wait out any group of debtors), no profit motive (so it has little incentive to apply cost-benefit analysis to secure whatever someone could pay), and the ability to write laws (it writes itself out of bankruptcy and give itself the ability to take from old age pensions).

By the way, the game theory model I alluded to is the Rubinstein Bargaining Model, which is still one of my favorites.  And there the patience of the relative agents is important.  If the other side doesn’t have a huge timeframe – say it needs the factory to be running ASAP, or the costs of the bank foreclosing and having to sit on property in a bad market doesn’t outweight the bargain of some level of payments that can be reached – the strikers have a stronger hand.  If the other side thinks of itself as having an indefinite patience and little need to think through cost-benefit analysis on any individual action – as the government does – the strike will likely lose on the material battle.  So any type of student debt strike will have to be targeted to both the public’s sympathy and opinion rather than material ends of shutting it down.

In general, I prefer it when the government uses its powers to provide insurance and public goods (like college) that enhance autonomy.  I don’t prefer it when it takes on the character of the shadiest debt collector.

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10 Responses to Some Quick Thoughts on the Notion of a Debtors’ Strike

  1. Wonks Anonymous says:

    In what economic sense is college a public good? Public research, maybe, but not college enrollment. Some have argued it’s a signalling game, and so economics calls for a consumption tax on it.

  2. Notorious B.O.B. says:

    Sure….and then let’s have a Tax Strike….for the 53%…..who would have to absord the journalism and gender studies and puppetry majors’ debts….what? they just disappear?….and since the government has decided that they are no longer in the business of public order and openly permit…indeed, join in and collaborate with OWS scum as they illegally and violently seize public and private property….in a concerted attack on our rights and property…we are under no obligation to pay taxes….a whiff metaphorical vigilante grapeshot would do wonders to concentrateb the minds of the New Class rulers, wouldn’t it? Class war?….Bring. It. On.

  3. Great post Mike

    I’ve given this some thought as well. A student loan strike is particularly tricky because the creditor in that case would be the public sector. It would be very easy to paint the strikers as “asking for a handout from the tax payer” – which is different from a homeowner fighting the bank that owns it’s mortgage. This is also complicates principle write-downs for those mortgages owned or insured by the GSEs

  4. Naked Cap has an interesting related post up on the complexity of government back loans, and how the debtors, banks and vulture funds are pitted against each other.

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  6. CDA says:

    Another factor working against a student debt strike is the fact that most student loans are co-signed by a family member, usually a parent. So if the student does not pay, the loan holder will go against the co-signer, who would have to also participate in the strike in order for it to have any impact. Working through all of the ramifications of a debt strike listed above, the individual debtor and the co-signer would also face these consequences. How many students would want their parents or other family members to be caught up in these consequences? It’s another complicating factor.

  7. Ellis says:

    You are being too pessimistic: the economy is rapidly crumbing and any disruptive mass actions will increase its instability: the threat of being blacklisted by employers loses its sting when chances of employment are slim. Most students take out loans in order to buy jobs that are well paid and comfortable, these are precisely the jobs which are disappearing.
    We are in a deepening Depression in which very high rates of unemployment will persist until mass action insists that society creates jobs and establishes minimal living standards. A student debt strike is not a panacea and those taking part in one will run risks, which will include (As CDA says) bringing family members into the firing line, such is the nature of struggle, it requires courage and leads, willy nilly, to the embarassment of “innocent” bystanders (if parents etc can be so regarded) but it breaks the passivity and submissiveness which is far more important to the ruling class’s power than its ability to implement wage liens or intimidate utilities’ billing departments.
    It was always perfectly possible, even in the techno barbarism of the 1930s, to identify and persecute those taking part in stopping farm auctions or rent strikes, and yet such tactics proved valuable, as of course did the strikes that Pinkerton’s men broke or tried to break.
    A student debt strike would have real consequences, not least in the financial markets, it would be rather like the 1832 threat in England to “go for gold to stop the Duke.”

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