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Debtfare states
and the labour of finance
Corresponding author:
Claire Parfitt, Department of Political Economy, University of Sydney, NSW 2006, Australia.
Email: cpar9693@uni.sydney.edu.au
Claire Parfitt
University of Sydney, Australia
Susanne Soederberg, Debtfare States and the Poverty Industry: Money, Discipline and the Surplus
Population, London, Routledge, 2014, 284 pp., £26.99 (pbk), ISBN 978-0-415-82267-1
An imagined division between the productive and the financial economy is a recurring theme
in both popular and scholarly debates about contemporary finance (e.g. Harvey, 2003; Foster,
2010; Lapavitsas, 2013). Particularly in the decade or so since the United States subprime
mortgage crisis, it has become fashionable to lay the blame for economic troubles at the doors
of parasitic and predatory banks. Scholarship on both neoliberalism and financialisation
requires a greater degree of precision in order to develop more accurate analyses of economic
phenomena and more effective leftist strategies. Susanne Soederberg’s 2014 book, Debtfare
States and the Poverty Industry, reflects some of these limitations, while otherwise making an
important contribution to our understanding of the role of debt in the contemporary economy.
Debtfare States marshals a wealth of empirical data to support Soederberg’s argument
that, since the early 1980s, the state has encouraged working class reliance on credit to meet
basic subsistence needs. On this basis, the author argues that the contemporary state has
become a ‘debtfare’ state, which supports and subsidises the growth of the ‘poverty industry’.
Soederberg provides a useful analysis of contemporary class relations and, in particular, the
role of the state in creating the conditions for capital accumulation. The book also presents an
important challenge to the rhetoric of financial inclusion and the democratising potential of
finance, consistent with the author’s broader intellectual project (see, for example,
Soederberg, 2010). There is, however, an important piece of the puzzle missing. Soederberg
gets caught in a distinction between productive or ‘real’ economies and financial ones (or
between the realms of production and of exchange). The author is critical of this distinction,
but in her effort to remedy the problem she ends up reproducing it. The consequence is a
missed opportunity to explore the role of labour in contemporary processes of debt-led
accumulation.
Debt is frequently identified as a coping mechanism for working people in the context of
reduced public provisioning during the neoliberal era. Soederberg follows this line of
reasoning, but delves into the detail of how working class reliance on debt is constructed
Finance and Society
2016, 2(1): 90-93
© The Author(s)
10.2218/finsoc.v2i1.1666
Book review
91 Finance and Society 2(1)
through the simultaneous depletion of publicly funded support for workers, especially people
in the Marxian sub-category of the ‘surplus population’, and through policies that support the
firms which constitute the ‘poverty industry’. Poverty industry profits rely on exorbitant fees
and interest rates attached to instruments such as short-term payday loans, student loans,
and credit cards, all of which Soederberg details in the book. Firms extend credit to people
who have limited bargaining power, as members of the surplus population. ‘Surplus
population’ is synonymous with the reserve army of labour. It denotes a fluid grouping of
people who are on low incomes, either unemployed or underemployed, and who are crucial to
on-going capital accumulation. The poverty industry is dependent on the state (for Soederberg,
the ‘debtfare state’) to create the conditions for its profitability, including the construction of
the surplus population itself.
According to Soederberg, the debtfare state supports credit-led accumulation through a
combination of practices that the author describes as a process of neoliberalisation. These
include corporate welfare, workfare, and debtfare. (Soederberg also includes monetarism
here. This is controversial, particularly given the shift in central banking practice since the
financial crisis of 2007-08, which raises fundamental questions about the relationship
between monetarism, monetary policy, and neoliberalism. These issues do not undermine
Soederberg’s debtfare state thesis more generally. However, it should be noted that monetary
policy has strayed from monetarism, that the relationship with neoliberalism is more
complicated, and that inflation management is no longer the crux of monetary policy). The
poverty industry grows through corporate welfare as usury laws and other regulatory
limitations on lending are relaxed. Workfare restrictions on social security condition the
surplus population by creating stronger imperatives for people to accept wages that are
insufficient to meet their basic needs, thereby increasing demand for credit. In addition to this,
the debtfare state relies on the rhetoric of financial inclusion and personal responsibility.
Working people are characterised as ‘consumers’, empowered through the use of money. At
the same time, debt default and poverty are portrayed as immoral and/or incompatible with
market citizenship and respectability. Fear of market discipline comes with the tightening of
bankruptcy laws. In sum, debtfare intersects with workfare to overcome the inadequacy of
wages and disciplines the surplus population.
An important element of Soederberg’s methodology is a focus on the veiled character of
social power. Based on Marxian theory, Soederberg’s (2014: 17) approach is “concerned with
understanding how a particular type of social relation gives rise to the power of things over
people”. The book explores how the relations of domination and exploitation characteristic of
capitalism are hidden, and ultimately aims to reveal this hidden content. The social power of
money is one of the veils that Soederberg lifts in this and other works (see, for example,
Soederberg, 2010), yielding various important insights, including a challenge to liberal
associations of money with freedom, equality, and democracy. In this respect, Soederberg
(2014: 24) raises concerns about the “artificial separation of the spheres of exchange and
production” and the “dichotomous view of the ‘real’ economy (production) and financial
markets (exchange)”. Her claim is that such a separation creates the illusion of a class-neutral
and democratic realm of exchange that might enable working people to overcome the
inequality they experience in the realm of production.
The primary strategy used throughout the book is to shift focus from the sphere of
exchange to the sphere of production. Soederberg draws attention to money’s function as the
universal equivalent in the realm of exchange, as a representation of abstract labour power
that is mobilised in production. Here, however, her analysis reaches an impasse. In trying to
draw labour and exploitation back in through a focus on the realm of production, Soederberg
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Parfitt
falls back on a distinction between the financial and the real economy. This implies that class
inequality can be understood at the level of production, but not at the level of exchange. This
in turn prevents an analysis of inequality produced in, and through, the realm of exchange, and
reproduces the separation of which Soederberg is critical.
Taking aim at the social power of money is an interesting move and is useful in
overcoming liberal notions of equality and freedom associated with credit, not to mention
challenging the supposed democratising potential of finance. Yet Soederberg’s decision not to
engage (or to engage minimally) with the financialisation literature misses an opportunity to
more effectively understand the relationship between exchange and production, the mediating
role of finance in that relation, and its transformative implications for the nature of capital
accumulation.
Soederberg deliberately avoids the term ‘financialisation’ because of certain weaknesses
in this area of scholarship. In particular, she criticises the financialisation literature for a focus
on speculation, predation, and greed as primary factors behind recent economic crises. This is
an important point, although Soederberg’s own analysis risks drifting into this kind of moral
critique through a focus on the predatory practices of payday lenders, credit card companies,
and others whose business models rely on high fees and exorbitant interest rates. The author
also argues that financialisation struggles to effectively explain contemporary political,
economic, and social phenomena because its analysis remains in the realm of exchange. For
Soederberg, consumer credit does not involve the extraction of value, except in a secondary
form. That is, value is produced in the productive sphere. Any extraction of value or exploitation
that takes place in the realm of exchange is treated as strictly secondary.
There is research in the financialisation literature that can help overcome this tension in
Soederberg’s analysis. Scholars who work on the ‘financialisation of daily life’ (Martin, 2002;
Bryan et al., 2009; Allen and Pryke, 2013) posit an integration of finance with accumulation
and exploitation, and seek to explore the ongoing imposition of a financial logic in many areas
of social and economic life. In particular, this literature reconsiders value theory to provide a
different way of understanding how capital-labour relations are structured. Specifically, it
argues that value is produced in what has previously been considered as the exchange
sphere.
Soederberg’s analysis is based on a classical interpretation of the labour theory of value.
Dick Bryan, Randy Martin, and Mike Rafferty (2009) take the analysis of finance through and
beyond Marx’s categories. They point out that rather than liberating workers, the extension
(and securitisation) of consumer credit is more likely to intensify contradictions between
capital and labour. A key example of this is the use of financial mechanisms to extract value
from the provision of indispensable goods and services, like utilities and mortgage
repayments, which at the same time further subsumes labour to capital accumulation circuits.
According to this analysis, the household becomes a site of capital accumulation through
financial instruments (Bryan et al., 2009). Like Soederberg, Bryan and his co-authors
recognise that households are increasingly reliant on credit in order to meet basic needs.
Finance (credit) facilitates the purchase of basic commodities for labour’s reproduction. Some
part of the wages paid to labour is extracted in interest payments. A surplus is being generated
and appropriated in the sphere of what we would normally consider exchange or circulation.
These authors extend their arguments about the accumulative role of labour-as-capital though
an analysis of derivatives, which are both commodities in themselves and the means through
which a range of household debts (such as mortgages, utility payments, and telephone bills)
are securitised.
93 Finance and Society 2(1)
John Allen and Michael Pryke (2013) have recently detailed one example of the incursion
of finance into daily life: the marketisation of water delivery in the United Kingdom. This
process links to Soederberg’s conception of the neoliberal state, and in particular to its role as
a provider of corporate welfare and opportunities for profitable investment. Allen and Pryke
(2013: 422) examine the use of financial engineering mechanisms to transform “a rather dull,
safe asset” into packages that can be traded “in the risk-taking world of financial calculation”.
Derivatives are created and sold, enabling the production and circulation of value through
finance. Households are (further) subordinated to the production of value in the workplace, in
order to obtain an income with which to pay their bills (comprising both service payments and
interest). But they also contribute to the production of value through their debts and the
securitised vehicles in which those debts are packaged. Scholars who focus on the
financialisation of daily life thus expose the fact that the realms of production and exchange
are already inextricably linked, and draw attention to the new ways in which financial
innovations create value. Soederberg wants to unite these realms but ends up re-inscribing
and relying on their division, privileging the realm of production as the site through which we
can understand exploitation. By contrast, Allen and Pryke’s utility bill securitisation is just one
example from the financialisation literature that demonstrates how finance is further
subsuming labour to capital, by transforming the (consumption activity of the) household into
an asset.
In conclusion, Debtfare States provides an important, detailed analysis of debt in the
contemporary economy and challenges the idea of liberation through access to credit. There
is, however, an opportunity to use the wealth of empirical data that Soederberg has gathered,
in conjunction with an expanded view of the role of finance in accumulation, to take the
analysis further, and to advance debates about the relationship between finance and other
parts of the economy. Revising our understanding of how and where value is produced will be
crucial to understanding how capital is accumulated today. This has significant political and
strategic consequences. A political strategy based on Soederberg’s analysis might, for
example, propose a step backwards to the fictional golden era of the welfare state. By
contrast, an analysis that understands the vital role of labour in a global financial system built
on household debt points to a more future-oriented politics.
References
Allen, J. and Pryke, M. (2013) Financializing household water: Thames Water, MEIF, and ‘ring-fenced’
politics. Cambridge Journal of Regions, Economy and Society, 6(3): 419-39.
Bryan, D., Martin, R. and Rafferty, M. (2009) Financialization and Marx: Giving labor and capital a
financial makeover. Review of Radical Political Economics, 41(4): 458-72.
Foster, J. B. (2010) The age of monopoly-finance capital. Monthly Review, 61(9). Available at:
<http://monthlyreview.org/2010/02/01/the-age-of-monopoly-finance-capital/>. Accessed 29
June 2016.
Harvey, D. (2003) The New Imperialism. Oxford: Oxford University Press.
Lapavitsas, C. (2013) Profiting Without Producing: How Finance Exploits Us All. New York, NY: Verso.
Martin, R. (2002) Financialization of Daily Life. Philadelphia, PA: Temple University Press.
Soederberg, S. (2010) Corporate Power and Ownership in Contemporary Capitalism: The Politics of
Resistance and Domination. Abingdon: Routledge.
Soederberg, S. (2014) Debtfare States and the Poverty Industry: Money, Discipline and the Surplus
Population. London: Routledge.
