How the rich strip wealth of the 99% through debt

Coming up on July 4 — a day in which we patriots honor patriotism — I offer this on modern “debt peonage” from Virtually Speaking and David Cay Johnston. It’s a terrific interview; Johnston is just so quick with the numbers and the easy-to-grasp framing.

As Johnston says here (my emphasis and paragraphing):

The idea of modern debt peonage or neo-feudalism came to my attention at Marcy Wheeler’s FDL blog. It’s an old concept–the idea is that you can sell yourself into temporary slavery, with a plan of working off the debt.

Most of us will remember hearing about indentured servitude as a means of funding a new life in America during the 17th and 18th centuries. But the practice is as old as domesticated agriculture. David Graeber discusses the practice at length in Debt, the First 5000 Years, describing, as well, the idea of a jubilee year when all debt, including servitude debt, is forgiven. This [jubilee debt forgiveness] was necessary, Graeber claims to forestall peasant uprising and land seizure.

A note about the interview — it actually contains several clearly differentiated segments. Feel free to jump to the ones that most interest you. I found the whole thing a great listen, you may find yourself with a little less time than I did. The segments are these:

▪ (Start) How the IRS scandal was perpetuated by an IRS official, Lois Lerner (Johnston now calls for her to be fired)

▪ (5:50) America’s Internet and why it’s lagging by miles behind that of the rest of the world — for example, the Internet in South Korea is one-sixteenth as expensive and 200 times faster (see what I mean about Johnston and his numbers?)

Writer David Cay Johnston

Writer David Cay Johnston

▪ (9:00) “Espionage” in a time of not-war and the prosecution of journalists for espionage by the National Security State (note the discussion of authorized leaks vs. unauthorized leaks)

▪ (18:15) Supreme Court voting rights decision and how Roberts, the “ideological radical,” lied to Congress in his confirmation hearing. Great story about Johnston’s daughter being harrassed by the Arizona state police.

▪ (23:02) Debt peonage, the increasing share of income controlled by the very wealthy, and permanent debt by us “peons,” or as Johnston calls it, “wage slavery” and “indentured servitude”

▪ (27:17) Back to the Supreme Court in response to a listener question — the radicalism and incompetence of the four right-wing justices, plus the pro-business bias of both parties. One stunning quote:

“We have a system now in which the only people in either party who get to run for president are people who are approved of by Wall Street and the rest of big business.”

▪ (36:18) More on debt peonage, debt in the ancient world, and the ancient practice of jubilees — periods in which all debts were summarily forgiven. Note the contrast to modern student indebtedness.

▪ (42:38) Accelerating inequality. Tons of great (meaning horrible) numbers here. One example (paraphrased):

If the income gain of most people since 1966 is one inch, the income gain of the top 1% of the top 1% is five miles. Mitt Romney is in the group, but at the very low end.

There’s also a great discussion near the end about our new world, in which more and more work is being done by capital, not labor. In that world, there are no jobs. From where will come the income for the rest of us?

Tales of the Rich and the Rest. Enjoy this great interview:

The graphic they mention in the interview, showing modern American personal indebtedness, is here (click to open in a new tab).  More commentary from Mr. Johnston here.


To follow or send links: @Gaius_Publius

Gaius Publius is a professional writer living on the West Coast of the United States.

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33 Responses to “How the rich strip wealth of the 99% through debt”

  1. Houndentenor says:

    Back in the days of the Soviet Union, the propaganda against American’s standard of living was that it was all based on debt. Americans, they claimed, had a lot of things, but they had borrowed for them which put them into a kind of slavery to the people they owed. That wasn’t really true of America in the 1960s and 1970s. Yes, homes were almost always bought with a mortgage but often there was an expectation that the mortgage would be paid off one day. I know many older people whose mortgage was paid off long ago. But I’m afraid that these accusations of the illusion of an American standard of living that is built on a pile of debt, is now a reality. Some debt is necessary. Much of it is not. We have a culture that encourages spending now and figuring out how to pay for it later and the result is that many people can just barely keep up with the payment on their debts (credit cards, for example) when times are good. If they have any temporary problem (unemployment, emergency of some sort, illness that keeps them from working, etc.) they are suddenly in trouble and since making one late payment often means ALL your creditors up your insurance the hole suddenly gets deeper and deeper still. Please support Sen. Elizabeth Warren. She has been sounding alarms about these problems for a long time. The banking industry loves keeping people in debt and paying interest in perpetuity. (The principle has often been paid off long ago while the cardholder keeps paying 20% or far more in interest on the interest on the interest.) But most of all, do your best to get out of debt and stay that way. I say this not to beat up on people who are in this situation (been there) but as a cautionary tale to people who are not. All the personal finance gurus (Orman, Ramsay, etc.) say basically the same thing. It’s good advice.

  2. Sweetie says:

    Whoever down-rated should explain to us how having that loophole won’t enable a two-tier elitist educational system. If kids can skip out of public school to colleges, then that’s what the rich kids will do to get out of mandatory public schooling.

  3. pappyvet says:

    Very good post ! 10% of the population of our “free” country controls 90%% of the wealth
    Of the 100 wealthiest countries on the planet,50 are not countries but transnational corporations.

    The latest U.S. Census Bureau figures reveal that, in 2011, “over 46 million Americans lived at or below
    the poverty threshold of a household income of $23,201 per year for a family of four,and “one in five of our children live in poverty. The new Dukes walk around pretending they are great successes but that success came off the back of a country they economically raped and working wages that are a cup that is barely dipped from the the ocean of wealth. Gag down as much as possible by paying very little and maintain government mouthpieces to blame the poor for being poor. It’s a brilliant strategy.

    On this Independence Day , a day we celebrate our freedom from the British,we need to realize that the Dukes and Barons are back with a more formidable arsenal than they have ever had. They have laws,mouth pieces,power, and great wealth at their fingertips . I find it strange that the party that claims to have christian values would not be at the forefront when faced with this reality.

    “If you dont want your tax dollars to help the poor,then STOP saying you want a country based on christian values,because you dont.” Jimmy Carter

  4. Kim_Kaufman says:

    Yes, it was a good interview. I had listened to it the day before. The visual of wage growth was startling. Johnston is pretty amazing at what he does and is always a good listen. Yes, modern civilization is at a crossroads of: what do we do? The plan was to automate as much as possible of repetitive, meaningless work so people could pursue more “important” things. Such as pursuit and study of the arts, science, philosophy… how to improve the world and ourselves. Perhaps noble things like… teaching our children. It’s not that there’s nothing for us to do, no meaningful work available… it’s that, by design, the 1% do not want an educated population or a population with too much leisure time – to think and possibly protest. But, unfortunately for them, there’s huge unemployment and underemployment. As Richard Wolfe pointed out, the 1% is perhaps making a tactical mistake with student debt: you have a large population of young, single, energetic people with intolerable debt and no meaningful work… history shows us that this scenario does not usually work out too well for the 1% in the long run. Strategically, the 1% is truly betting on short term gains – with huge long term losses. I’m betting on the youth.

  5. ArthurH says:

    Actually none other than Rep. Eric Cantor has proposed a bill that he trumpets as being pro-family by giving working mothers flex-time on the job. Yet a reading of the bill puts the power of altering on-the-job hours only in the hands of employers. Say you need two jobs to make ends meet. Cantor’s proposal would allow employers to scatter your work hours all over the clock to meet the employer’s needs. If his needs conflict with those of the second job, tough! And if the working mother is called into work and the employer finds business slow he can send you home and pay for only an hour’s work regardless of you having contracted with somebody to watch the kids while you were working. And if you put in enough hours to qualify for overtime pay, Cantor’s bill would allow employers to offer comp time later and can tell the employee when (if ever) he or she can take it.
    In reading Cantor’s bill, I first thought it was a Mad Magazine spoof. It isn’t but it does use the same logic Mad employed in an article on how to read package labels. One label on a bottle of aftershave lotion read “Save 50%” but an asterix pointed to small type that called attention to the fact the bottle was half full. Said the tiny type. “Check contents. Yes, we save 50%, not you!”

  6. Ferdiad says:

    Yes, but the single most lucrative way the 1% (better yet the .001%) does is through the Federal Reserve. Just remember that every time we increase spending in government you are literally putting billions and billions of dollars into the hands of the few families that control the Fed.

  7. Kenster999 says:

    Actually, it occurs to me that a statement like “If the income gain of most people since 1966 is one inch, the income gain of the top 1% of the top 1% is five miles” may not be as insightful as it first sounds. It seems that having huge gains at the upper end of income brackets is to be expected if you look at a small enough sample at the very top of the scale. In other words, let’s say everyone gained *something* since 1966; fine. But did a very, very few people (the top 1% of the top 1%) earn a ton? Sure, a few are going to do tremendously well.

    The problem isn’t that those few at the very high end earned so much. (“The few richest people in America are extremely rich — no duh!”) The problem is the distribution within the remaining 99.99% — we need to have more of the gain in the middle.


  8. BigGuy says:

    The 13th amendment abolishes slavery and conditions of involuntary servitude.

    What about VOLUNTARY servitude?

    That’s the Republican solution to increase employment.

    After the minimum wage is eliminated, people will be free to contract with employers to do work where they are paid in kind, rather than paid wages and salaries. Republicans propose to allow people to contract to work for room and board — only — for as many hours as the employer and employee can mutually agree is beneficial for both. Were the Republican proposal to go through, tens of thousands of Americans will be able to work like the millions of men and women in China who work for Foxconn producing Apple phones. The only real difference is that the American manufacturers here in the USA will be able to produce goods while paying Americans here in USA even less cash than Chinese workers get in China, since the Americans will be working for room and board, not for cash wages.

  9. Sweetie says:

    People are forced to do lots of things. If they want to drive, they’re forced to get a license. Kids are forced to go to school of some variety.

    You can “object” to the term, but your post doesn’t explain how letting the children of the rich opt out of the public schools is going to in any way “agree in general where you are going with this”.

    The entire point is that the only way to get institutional investment to where it needs to be is to make the elite play ball. That you don’t like the current state of the public schools just reinforces the necessity of my solution.

  10. karmanot says:

    Obozo’s historic failure and animus for universal health care will mark his legacy for the meritocracy it has been and his reputation, in spite of the lofty oratory, is that of a fairly average political hack.

  11. GaiusPublius says:



  12. karmanot says:


  13. karmanot says:

    Thanks NP, that’s what I meant—-replacing the rust belt with mercantile neo-feudalism.

  14. Naja pallida says:

    Nah, Wal-Mart has a completely different model. Pay your employees so little that they have no choice but to shop at your store. Have their non-living wage salaries subsidized to the tune of billions from the federal government. Destroy all local competition so even people who don’t work for you don’t get a convenient choice.

  15. karmanot says:

    I said I object to the term FORCE. “You now say you wouldn’t send anyone you care for to a public school.” Picking nits with me is not an argument for the dismal and atrocious condition of inner city and poor neighborhood public schools. The destruction of America’s public school systems, once the best in the world during my youth, rank among the lowest in the world thanks primarily to Republicans from Reagan through the Bushes. Obozo hasn’t done much either. So, to repeat, “I wouldn’t send my dog to one of those schools.

  16. karmanot says:

    The new name for it is WAL*MART.

  17. cole3244 says:

    thanks again!

  18. nicho says:

    Any system of healthcare other than single-payer universal health care is horribly flawed.

  19. Sweetie says:

    It looks like you should think a bit more on this, because your post is internally contradictory.

    You don’t want everyone to be required to go to public schools, the one and only method of ensuring high-quality public schools. You said you valued your public school education. You now say you wouldn’t send anyone you care for to a public school.

  20. Sweetie says:

    I knew I was supporting your point. However, I was targeting it more specifically. Education really is the foundation and is the place to concentrate your point. The only thing that matters more to the elite than money is their offspring. While some may value money more, it has the tendency to build and/or protect itself over generations.

    Because of this high valuation, school quality would have to be top-notch. Having all sorts of loopholes, which we do now, is designed precisely to degrade the quality of educational opportunities for the masses, and thus life opportunities.

  21. Naja pallida says:

    Exactly. Universal public education is the foundation of every single advancement we’ve made in the last hundred years. As soon as you start eroding that education, we slide back into idiocy. When people don’t grasp simple concepts like how they are being screwed over, they just keep going along with it.

    But we have a strong streak of people in this country who believe it is their God given right to be stupid, and to make sure their children as stupid as they are.

  22. Naja pallida says:

    We’re almost back to the days of being paid in company vouchers, that you can only spend at the company store, in the company run town.

  23. karmanot says:

    “Force EVERY child” I don’t think so. But I do think I agree in general where you are going with this.I was the only one of my family, who insisted on going to public schools and never regretted it. They were excellent, with a full spectrum of sciences, math and arts. These days I wouldn’t send my dog to a public school.

  24. karmanot says:

    Excellent post Gaius! You always manage to dig deep into these investigative pieces. David Cay Johnston is an amazing scholar, speaks plainly and has that ability to lay out complex formations of tax and economy is simple direct paradigms. For several years now some of us have been referring to the new economy as neo-feudialism and I’m glad to see that explored.

  25. ArthurH says:

    One of the latest ways for the 1% to strip you of wealth is the Payroll Card. Instead of giving you a paycheck you can cash at your bank or direct deposit you pay into your savings or checking account, they give you your pay on a card not unlike a debit card. Employers get rebates for affiliating with big banks underwriting the cards, but employees can get their money only by plugging the cards into ATMs, where they are subject to fees. The employers and the big banks thus increase their revenue flow at their employee’s expense.

  26. cole3244 says:

    thanks for making my point however unintended.

  27. Sweetie says:

    And, no more of the “leave high school to attend college courses” stuff either. The curriculum in the public schools would have to be robust enough to challenge high-IQ students. Safeguards would have to be put into place to prevent teachers from sabotaging students from less wealthy backgrounds (I’ve seen this happen personally), too.

  28. Sweetie says:

    You want a change? Force EVERY child to attend the public school system, and fund those schools the same amount — no matter where the school is located. Require a universal national curriculum and universal national teacher certification standards. Make every child eat their meals in the school cafeteria — no packed lunches allowed.

    I guarantee that there would be massive massive improvement to education. Education is the foundation of social inequality, along with nutrition and other health factors.

  29. lynchie says:

    By forcing the population to have health insurance through a penalty system, Obama has set the table for all employers to pull away from providing health care. We will be left with a shitty system with huge co-pay (mine went from $3,000 to $6,000) and I pay $300 a month on top. The co-pay is after tax money so add 30% to it and most people are paying 20% to 25% of their take home pay for health care that still can be denied, that allows hospitals and doctors to still bill you for anything the insurance company won’t pay.

  30. cole3244 says:

    everything and anything that is needed to survive and not a supposed luxury should be socialized, police, fire, schooling thru 12 are all socialized why not insurance (auto & home), healthcare and other necessities, socialism is not a bad thing for the 99% only for the 1% and as they have us screw them, and let them fight their conflicts since they support them and benefit from them.
    our system of economics hurts the 99% and only the !% benefit, that is not a democratic system i support nor should an informed intelligent citizenry, unless it wants to commit economic suicide.

  31. jacquirafiq says:

    What the market will bear. In America the market bears the rich getting richer, while the rest of us shrink and then die. To many americans are so stupid they continually vote against their own best interest over and over. Believing the argument mostly republicans make…. telling them this will be good for you, even though its mostly only good for big business. I am sick of living in a country where white people are so easily convinced that their elected officials really care about their day to day lives. Yes white people( African Americans vote democrat 95%)Really…. please

  32. Whitewitch says:

    And will indenture us even more with the requirement to purchase Health Insurance or be “penalized” by the Government, which Government YESTERDAY gave a one year extension to Corporations and Businesses, BUT not to the common man. Get ready for that to stick and employers not to have to ever provide insurance. President Obama is sooo sneaky.

  33. condew says:

    If you don’t have debt, you still have insurance premiums. The cost of health insurance alone makes me feel enslaved.

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