The politics of debt: social discipline and control - Werner Bonefeld

Bankers during 1992's 'Black Wednesday'.
Bankers during 1992's 'Black Wednesday'.

Werner Bonefeld on debt, which became a serious political and social issue during the 1980s and 90s, culminating in Black Wednesday in September 1992.

Submitted by libcom on November 1, 2005

The Politics of Debt:
Social Discipline and Control [1]

I. Introduction
During the 1980s and 1990s debt has become a serious political and social issue. This is true at the personal level and at the public level. The huge number of personal bankruptcies, insolvencies, bad debt and currency crises, culminating in Black Wednesday in September of 1992, brought home to public consciousness the awesome power of money. Debt is just one aspect of the changed perception of money. During the 1980s, not only in Britain, but all over the world, the attempt to control public expenditure, to lower wages, to expand part-time work etc., has meant a more direct subjection of every aspect of life to money. Against the background of a concerted attack on collective provisions, access to medicine, housing, education, transport, etc., depend much more directly on the quantity of money we possess. At the same time as governments tried to freeze public expenditure, access to provisions such as, for example, healthcare became more and more dependent upon the ability to pay.

The sheer misery of poverty and homelessness in the 1990s is there for all to see. However, the increase in poverty is not really surprising against the background of the credit-sustained boom of the 1980s. In fact, the level of repossessions, personal bankruptcies, etc., is intrinsically linked to the 'prosperous' 1980s. During the 1980s, the principal means of containing inflationary pressure was the control of that part of public expenditure which supported policies of social redistribution. Those dependent upon government welfare spending were held responsible for the containment of inflation through a reduction of public spending relative to GDP. Although the overall level of public expenditure increased, individual benefit rates were cut. Further, the attempt to balance credit-expansion through a policy of state austerity was reinforced by the integration of social policy with labour market policy, as emphasised by the government's training programmes, tax and poverty traps, as well as imposed reliance on credit-based consumption. Furthermore, the increase in low pay was supported by the deregulation of wage councils, mandatory competitive tendering as well as the weakening of trade union control of the labour market. Wage council protection for a number of workers in low paid employment was repealed, making it legally possible to reduce wages below poverty levels. Local authorities, as well as the NHS, were forced through financial pressure, compounded by mandatory competitive tendering, to restrain wages. This was achieved either by contracting services out to private operators or by using the threat of contracting out to achieve compliance from trade unions with wage restraint. As a consequence wages declined and conditions deteriorated (Ascher, 1987; Rowthorn, 1992). The discrepancy between high and low paid workers increased dramatically over the last 15 years to 'levels greater than anything since the 1940s' (S. Brittan, Financial Times, 6.1.94). The socialisation of the debt problem through worsening conditions, low-paid work, as well as tax traps, poverty traps, rent arrears, and homelessness, was compounded by the shift in emphasis from direct to indirect taxation, particularly the increase in VAT and National Insurance contributions, and high real interest rates. The attempt at reducing public expenditure as a proportion of GDP did not only trap people in poverty but, also, did not let them out of debt.

This paper looks at the politics of debt in Britain over the last 10 years. The aim is to explore this issue in terms of social discipline. Throughout the paper, the notion of 'class' is used predominantly in sociological terms. [2] This is because the focus is on the disorganisation of class relations through social divisions which deny social cooperation and solidarity. The connection between poverty and gender, racism, ageing, disability, and low-income, though not new, has been reinforced over the last decade. The paper examines the policy of debt under Major and concludes with an assessment of recent debates on 'citizenship' by all major political parties.

II. Debt and Social Division
During the 1980s, the ratio of household debt to disposal income increased dramatically. It had 'remained steady at 40-50 per cent in the 1970s and early 1980s, rose from about 45 per cent in 1982 to just over 50 per cent in 1984, and then to over 90 per cent in 1990' (Dunn and Smith, 1994, p. 84). The casualisation of employment and financial insecurity were mirrored by a growing ratio of debt to future wage income, particularly affecting those who appeared to benefit from the 1980's boom by, for example, home-ownership. However, many had to borrow in order to secure basic needs, whilst their income proved inadequate to sustain repayment. The connection between low income and credit was reinforced by social security reforms, the deregulation of wage protection, the weakening of trade union control of the labour market, government work-for-your-benefit training programmes and, particularly, the adoption of the means-test to determine most social security benefits. Against the background of housing benefit reforms and rising rent charges, many struggled to pay their rent. Indeed, during the 1980s, rent arrears was the most common debt problem (see Berthoud/Kempson, 1990). Furthermore, government's social fund, which replaced Family Income Support in 1989, had to be repaid. The fund is an interest-free loan for people with special needs. Although claimants might be assessed as eligible for entitlement, the payments are limited by local DSS budgets, imposing a ceiling on the total amount a local DSS office can provide. In its first year of operation the social fund was '40 per cent over budget' (McGlone, 1990, p. 168). Those who successfully apply at a time when money is still available are expected to repay these loans from subsistence level Income Support (see Ford, 1991).

Many of the very poor were excluded from credit-facilities because they were denied a bank account. They relied on legally registered or illegal loan sharks who charged astronomically high rates of interest (see ibid.) and resorted, in a number of cases, to physical assault in case of non-payment. Available evidence supports the association between poverty and credit and between low income and debt. [3] The increase in part-time, low-paid work, and means-tested benefits, meant that basic needs had often to be secured on the basis of borrowing, precipitating a cycle of debt as additional credit was required to secure repayments of outstanding loans. The situation is particularly painful for lone mothers. [4] During the 1980s, the number of lone mothers dependent on state benefits for their income increased from 320,000 in 1979 to more than 700,000 in 1989 (ibid.). At the same time, the percentage of working lone mothers dropped while those in part-time work were often excluded from eligibility for 'employment protection measures such as redundancy payments, unemployment benefit or sick pay' (ibid., p. 72). Additionally, their access to unemployment benefit is threatened by the requirement to show adequate child care arrangements before qualifying as 'unemployed'. There is a lack of nurseries and for many lone parents a nursery place is often beyond their means. Their position as unwaged workers in a waged society is made worse by the denial of unemployment benefit and child-care facilities. They depend on access to credit.

The connection between poverty and credit has not changed in the 1990s. A recent study (Kempson et al., 1994) argues that half the mothers in low-income families regularly go without food to secure basic needs of their children. In the 1990s, the attacks on single mothers who are 'married to the state' rather than a breadwinner and the moral panics orchestrated by the Conservative government since 1993 targeting also beggars, young offenders and pensioners (see McRobbie, 1994), indicates that, in the pursuit of public expenditure cuts, welfare support of conditions is an expense to be avoided. However, not only 'claimant groups' are trapped, the government's education policy caught many students in debt. During the 1980s, their financial resources declined while essential resources, such as books, rose in price. In 1989, students were denied access to housing benefit and then expected to meet extra costs such as the Poll Tax. Since October 1990 the student grant has been frozen and a complementary 'loan system' instituted. The company charged with providing student loans has now lent £700 million and the figure is rising (Guardian, 2.8.94). By 1993-94, 20 per cent of students were reported to have considered abandoning their studies because of financial hardship. Debts amounting to several thousand pounds are common. This situation is likely to get worse because from September 1994 maintenance grants are to be cut by 10 per cent a year for the next three years (Observer, 21.8.94). The costs to sustain the University education of children are particularly painful for working class families lacking the private means to supplement grants and for middle class families whose earnings are too high to qualify for a student grant and who are, at the same time, trapped by mortgage debt which they find difficult to service.

III. From the 1980s to the 1990s
The conditions for 'Thatcherism's' relative success were the political defeat of the organised working class and the world boom of the 1980s, unleashed by the global liberalisation of financial markets and sustained by an explosion of international credit. However, these conditions were ephemeral. The crash of 1987 indicated that the neo-liberal policies of the 1980s had reached an impasse. Although the world boom was sustained for a while after the crash in 1987 by continued credit-expansion, the foundations of the boom were rapidly crumbling. The bubble, created by credit-expansion, burst in the late 1980s. At the same time, average wages continued to keep up with inflation and, despite mass unemployment and an expanding casualised and low paid labour force, the attempt to lower unit labour costs failed. This was particularly true in Britain. The Thatcher governments of the 1980s presided over an increase in private and corporate debt, persistent inflationary pressures, mass unemployment, and comparatively high unit labour costs. [5] In Britain, high unit labour costs were adjusted to competitive price rates at the world market through currency devaluation and a policy of social dumping.

The last decade did not represent a frontal assault on the working class. Sections of the working class enjoyed a growth in living standards, even if they paid the price of inten-sification of labour. [6] The use of public expenditure focused on the disorganisation of class premised on the divisive orientation of collective welfare provision to the market. This was brought about by, for ex-ample, contracting out of services, deregulation of wage protection, in-tegration of employment and social policies and encouragement of property ownership. The attack concentrated on those sections of the working class, such as women, young workers, the unemployed and 'racial' minorities, which could be separated from the organised labour movement much more easily than others. Under the Major government, these workers continued to be disciplined through debt and precarious (short-term, casual, non-unionised, unhealthy, cheap and often dangerous) work. However, austerity encroached upon the apparent beneficiaries of the 1980s: they too found themselves in increasingly strained circumstances.

The continued mugging by the state of those pushed to the margins of society continued unabated under the Major government. However, we must be careful with the use of our terms. The state does not mess about with poor people, the homeless, the unemployed, the disabled, the low paid, the financially insecure and all others upon whose labouring existence national wealth rests. It governs in the national interest and personal freedom. The issue of 'freedom' is specific: 'poverty is not unfreedom' (cf. Joseph and Sumption, 1979) and intensification of work and lower wages (i.e. lower unit labour costs) are in the national interest. Deteriorating conditions and hardship improves Britain's position on the world market and future prosperity will derive from improvements in Britain's global competitiveness, offering better conditions and affluence for all in the long run. In other words, deteriorating conditions are only transitory as improved economic performances will eventually trickle down to the original producer and so rectify present conditions of hardship in the long run. Compliance with hardship is thus declared to be in the national interest and economic uncertainty becomes, by implication, a symbol of patriotic endurance. Safeguarding of the national interest requires lower public spending and a balanced budget, wage restraint, increased labour productivity, low rates of inflation and a sound balance of trade. The Thatcher governments ruled in the national interest by disciplining social relations through poverty, debt, unemployment, intensification of work, anti-union policies, economic insecurity and harsh conditions associated with the reform of the welfare state to a warfare state. These achievements were endorsed as being in the national interest: the fundamental challenge to the Thatcher government by the miners in 1984/5 was denounced as an action by the 'enemy within'.

The vilification of single mothers by the Major governments continued previous attacks on the so-called dependency culture. That poor people go hungry is, in this view, not a consequence of welfare policies, debt and poverty, unemployment and a labour market policy which is premised on the casualisation of employment and low pay as well as 'economic conscription'. Rather, the '12 million people who live in households with less than half of average earnings' (Guardian, 1993, p. 6) lack responsibility. They simply go hungry because they 'buy the wrong food' (A. Widdecombe, Junior Social Security Minister, according to Guardian, 4.6.91). The position of unwaged people in a waged society makes them not only exploitable for moral crusaders who proclaim the virtues of law and order as well as family values. They also become exploitable by creditors demanding repayment and legal action. Families on benefit or low income are forced into debt to provide essentials such as food, housing, fuel and clothing (see Kempson, et al., 1994). The other side of a politics of debt is physical and mental illness (see ibid.), symptoms of a desperate struggle to make ends meet. For some, prostitution becomes a means of survival. [7] The rationale behind, for example, the attack on lone mothers is not that of reducing the overall burden of public expenditure, or of encouraging them to re-enter the labour market. They are already on the labour market seeking proper employment, and the savings from further cuts in individual benefit rates would hardly amount to a significant reduction in the overall level of public expenditure. The rationale is the imposition of discipline and control effected through vilification, ghettoisation and financial insecurity.

The disciplining power of debt reinforced social division and, at the same time, united people through the common experience of financial distress. The moral panics of 1993 can be interpreted as an attempt to emphasise the difference between beggars and lone mothers, on the one hand, and those whose own financial distress still distinguished them favourably from the plight of the unwaged in a waged society, on the other. Those on the edge of poverty were thus invited to feel comfortable in comparison with beggars. They were thus given the opportunity to look down and to point their fingers at beggars. Unfortunately for the government, this attempt at setting people against each other back-fired. The finger was pointed at government.

There is sharp difference between the debt economy of the 1980s and the 1990s. During the 1980s the boom vindicated the market-based restructuring of the welfare state and the control of people through poverty and tax traps. Despite severe wage pressure for some workers, average earnings increased during the 1980s. According to Glyn (1992, p. 81), 'aggregate real incomes fell by 5%. Those workers who kept their jobs, however, saw a substantial (28%) increase in their real wages.' Alongside property ownership, 'most people therefore felt themselves better off year by year' (German, 1993, p. 16). In other words, social conflict was contained through wage increases which far outstripped the rate of inflation at the same time as the increase in debt and poverty discouraged solidarity with those whose poverty was the mirror image of the 'prosperous' 1980s.

However, the ready extension of credit and the coercion entailed by the collection of debt are two sides of the same coin. The lifeblood of the boom was credit and the price for the control of credit expansion was paid by the working class, particularly the unemployed, so-called ethnic minorities, women and the impoverished. Those fortunate enough to participate in the boom were disciplined by the threat of marginalisation. They faced harsh penalties should they fail to respond adequately to market forces or should they be in disagreement with 'management's right to manage'. The sack, or loss of wages, or even a reduction in overtime, meant that contractual agreements on interest payments might be disrupted. During the 1980s, the incentive not to risk the bases of life, such as housing, education, health, clothing, heating, and so forth, helped to undermine solidarity and made social relations exploitable for a policy of state austerity. The risk of debt and the futility of industrial militancy was for many confirmed by the miners' strike of 1984-5. It showed the consequences of disagreement and the misery caused by lack of money. The social conflict was contained on the basis of what Hirsch (1991) refers to as the 'southafricanisation' of metropolitan countries. This characterisation is shared by Negri (1989, p. 97) who argues that the 'ideal of modern-day capitalism is apartheid'. However, and as Negri insists, unlike Hirsch, apartheid is the ideal but not the reality. The reality was an accumulation of debt on future surplus value production and an accumulation of debt on future wage income. Overt forms of social conflict were avoided through credit-expansion and indebtedness as well as the marginalisation of those deemed inessential. The market based reform of social provision involved a disorganisation of class relations distinguishing between the strong and able and the weak and marginalised. The politics of market self-regulation was in fact a politics of poverty and debt.

The 'dual society', that is, the polarisation of social relations between the poor and indebted, on the one hand, and average wage earner and indebted, on the other, was not an end in itself. Rather, it was a condition of containing social conflict on the basis of polarisation. This polarisation looked more and more fragile the longer the boom progressed. Following on from the loosening of monetary policies in 1982 and especially after the crash of 1987 and from the support to the consumer boom through the tax-cutting budgets of 1987 and 1988, the growth of debt as a proportion of future income became more and more unsustainable. Coinciding with the passage of the Community Charge (poll tax) through parliament in 1988, introduced in Scotland in 1989 and in England and Wales in 1990, government responded to growing unease on financial markets over the deterioration of the so-called Lawson boom by tightening monetary policy. The social security reforms of 1988 and 1989, as well as the poll tax, supported the pound through a tight fiscal regime at the same time as interest rates were raised from 7.5 per cent in May 1988 to 13 per cent in November of that year, and to 15 per cent in October 1989. Interest rates remained at 15 per cent for just over a year until they were cut to 14 per cent, coinciding with entry into the ERM in November 1990. The poll tax was an ill-devised attempt to make people pay the costs for the growth in credit. However, its introduction indicated that the credit-boom of the 1980s had reached an impasse and that the time to pay up had come.

IV. Debt and Social Discipline in the 1990s
When interest rates increased in the late 1980s, the cost of borrowing became intolerable for many. Although average wages continued to increase up to 1992, disposable income declined through a combination of inflation, increases in indirect tax, and higher borrowing costs. Debt squeezed household income. The debt hangover was enormous: 'Total personal debt trebled between 1980 and 1992, from £100 billion to £ 300 billion', making 'actual wage levels today lower than they might at first seem' (German, 1993, p. 19). The property owning democracy of the 1980s was not only held responsible for enjoying benefits which had not been earned. It also transformed into a republic of debt.

By the late 1980s, one in nine households struggled to make ends meet (see Berthoud/Kempson, 1990). In the second half of 1989 alone, the rate of home loan arrears between 6 and 12 months rose by 29 per cent and about 450,000 to 600,000 families were said to be two months in arrears (Guardian, 5.3.90). These arrears were not confined to the poorer regions but included wealthy areas in the south. The UK joined the ERM with interest rates at 14 per cent (down from 15 per cent) while inflation was at 9.5 per cent in 1990 (up from 7.8 per cent in 1989). During 1991 interest rates declined further from 13.5 per cent in February to 10.5 per cent in September, compared with an inflation rate of 5.9 per cent. During 1992, interest rates declined dramatically, especially after the suspension of the pound's membership in the ERM on September 14th, 1992. However, they still stood at 7 per cent in November 1992, compared with an inflation rate of 3.7 per cent. [8] Real interest rates remained high, representing a huge transfer of resources from private debtors to banks and building societies who, themselves, were struggling with high rates of bad debt exposure. [9] The reduction in interest rates did not indicate a relaxation of monetary policy. The politics of monetary tightness continued as real interest rates remained high. At the same time, fiscal policy was tightened and public sector pay frozen.

During the 1990s, the monetary squeeze on debtors was enormous. Unemployment increased from the official rate of 5.9 per cent in 1990 to 8.3 per cent in 1991 and 10.1 per cent in 1992. Bankruptcies increased dramatically, per year, from 9,365 in 1989 to 35,940 in the first nine month of 1992. During the same period, company liquidations rose from 9,427 to 24,825. Manufacturing output contracted and the volume of retail sales declined dramatically. The GDP dropped from 2.1 per cent in 1989 to -2.2 per cent in 1991 until it 'recovered' to -0.6 per cent in 1992. The PSBR which had shielded the pound in the late 1980s from sustained speculative pressure, moved from -14 per cent in 1988-89 [10] to a staggering 36.5 per cent in 1992-3. At the same time, the amount of outstanding bank and building society lending increased year by year, reaching £622.8 billion in 1992 compared with £504 billion in 1989. Indeed, as the Financial Times (19.10.92) reported, 'mortgages in arrears are quickly approaching total building society capital.' House prices collapsed. The number of repossessions reached staggering proportions: 75,540 properties were repossessed in 1991, 68,540 in 1992, and 58,540 in 1993, compared with 15,810 in 1989 (McKie, 1994, p. 119). This 'socialisation' of the debt problem was reinforced by an equally dramatic increase in mortgage payment-arrears: The number of mortgages in arrears in 1989 stood at a level of 80,600. By 1992, this figure had increased dramatically to 352,000 and had fallen slightly to 295,500 by 1994 (CSO, 1995). The property owning democracy collapsed under the threat of debt, repossessions and homelessness. According to the Independent (19.7.93), around 150,000 young people were becoming homeless each year. The 'unofficial homeless' both actual and potential in England in the 1990s is judged to be approximately 1,712,000 (Burrows and Walenotwics, 1992). This estimate includes people sleeping rough (c. 98,000), unauthorised tenants or squatters (c. 50,000), single people in hostels (c. 60,000), single people in lodgings (c. 77,000), insecure private tenants (c. 317,000), and the hidden homeless (c. 1,200,000). (Atkinson and Durden, 1994, pp. 193-4).

Repossessions, evictions, homelessness, and loss of wages and jobs, were not the only forms taken by the socialisation of the debt problem. When the property market deteriorated, many home owners were left with negative equity. By the fourth quarter of 1994, 1,300,000 were left with a negative equity (Observer, 22.1.95). That is, their mortgage debt was higher than the present market value of their ill-affordable property. While many home owners were in arrears with their mortgage obligations, they found it very hard to solve their cash-flow problem by selling and moving to cheaper accommodation. They, too, were trapped in debt. Their assets changed into liabilities. While the Chancellor Norman Lamont endorsed rising unemployment and business failures as a price worth paying for the defeat of inflation (cf. Smith, 1993, p. 188), the transformation of a property owning democracy into a democracy of debt undermined the most popular policy of the Thatcher era. Mortgage default not only threatened Labour voters but included also the traditional Tory support. Their faith in 'Thatcherism' which had already taken a critical turn with the introduction of the poll tax and particularly the uniform business rate, [11] was broken against the background of repossessions, negative equity and job threats. Indeed one reason for the crisis of the Conservatives is the 'crisis among the lower middle classes' (German, 1993, p. 4) who, traditionally, supported the Conservatives. 'Their businesses bankrupted, their homes repossessed and even managerial jobs under attack' (ibid.), they have found 'that the market economy intended for the working class has instead come to their own door with a vengeance' (Hutton, 1994, p. 2). Debt, as Hutton reports, 'has suddenly become the millstone around the middle-class neck' (ibid.).

The increase in poverty, economic insecurity and financial distress is not just caused by low wages but also by the level of taxation, the debt hangover and the replacement of full-time employment by part-time employment and interest rates outstripping rates of inflation. In an attempt to contain the fiscal crisis of the state and cap consumer spending, the government introduced VAT of 8 per cent on domestic fuel in April 1994 proposing that this should rise to 17.5 per cent in April 1995. The proposal was defeated in December 1994. In addition, the Spring budget of 1994 saw the freezing of personal allowances, a 5 per cent reduction in the married couples allowance, an increase in national insurance contributions, and a cut in mortgage interest relief from 25 per cent to 20 per cent. From October 1994, the government levied a new 3 per cent insurance premium tax, and from November a new air passenger tax. By April 1994, the average tax burden, in direct and indirect taxes, totalled 35 per cent of earnings. This is set to rise to 36.2 per cent in 1995-96 as compared with a figure of 32.2 per cent in 1978-79 under Labour. The burden of taxation falls most heavily on those sections of the working class existing on below average earnings. For those on three-quarters average earnings, the increase was from 27.4 per cent of income in 1978-79 to 31.2 per cent in 1994-95. However, those with two children on ten times average earnings would see the burden of taxation rise from 37.3 per cent in 1992-93 to just 37.7 per cent in 1994-95 (Financial Times, 24.1.94). In a survey of the period from 1979, William Keegan (Observer, 16.1.94) indicated that despite the well publicised reduction in the upper marginal rates of tax since 1979, tax increases since 1993 have led to a position where the average family has a greater direct tax burden than in 1979. During the 1980s, the increase in VAT and higher National Insurance contributions offset much of the putative benefit from lower direct taxes. At the same time, the direct burden in fact increased - for those earning less than £78,000 a year - because of the erosion of tax allowances.

The socialisation of debt through high real interest rates was thus compounded by fiscal tightness. Government sought to contain inflation by making people pay-up. Despite lower retail prices and a decline in the rate of inflation to below 4 per cent since 1992, consumer spending declined as people tried to service their debt. However, many people not only failed to reduce their debt but were also compelled to increase their borrowing. According to a report in the Financial Times (9.7.93), the number of people getting into debt increased during the second quarter of 1993. This is not surprising because the difficulties in securing basic needs means that repayment obligations might not be sustained, rendering additional credit a means to secure the servicing of previous credit-obligations.

The recession of the 1990s led to a dramatic shake out of labour. Yet, average wage increases declined only slowly during the early part of the recession from 9.5 per cent in January 1990 to 7.25 per cent in January 1992. Since then, however, average wage increases declined dramatically to 5.5 per cent in September 1992, and to 3.75 per cent in April 1993. The decline in disposable income coincided with massive redundancies. Employers laid off workers and curbed overtime in an attempt to reduce costs. 'By February [1992] 1,500 were loosing their jobs every day' (German, 1993, p. 11). The rate of unemployment increased from a low of 5.6 per cent in April 1990, to over 10 per cent in 1992 (see McKie, 1993). The sustained effort by the Major government to make people pay through poverty, job uncertainty and insecurity did not involve, as it did during the 1980s, a divisive attempt at mugging those in precarious work. Although the mugging of the poor continued unabated under Major, the middle classes suffered as banks cut back on employment, as companies seeking to reduce wage costs cut down on their white collar staff, and as government itself, including its National Health Service, announced job losses for the middle-class salariat. The generalisation of the debt problem coincided with the generalisation of unemployment. Cost saving exercises meant that not only blue collar workers were laid off but, also, that white collar staff had to go.

The disciplining powers of debt, fiscal tightness, and precarious work, can not be overestimated. Indeed, the politics of debt amounts to an attempt at disciplining social relations to monetary scarcity and a life of hard and unrewarding labour to sustain basic needs. The incentive not to endanger the bases of life, such as housing, education, health, clothing, heating, and so forth, helped to undermine resistance to wage reductions and the introduction of new working practices. People know it is bad. They see their neighbour's sudden unemployment, they know what 'repossession' and eviction mean. They know what it means to struggle with inextricable debt problems under conditions of fiscal tightness, precarious employment and wage restraint. They struggle to make ends meet, to hold on to their flats and to maintain their level of consumption. Tax increases bite into their budgets. They know that loss of employment and wages might mean loss of almost everything. They also know that social security benefits are tailored around the incentive effect of finding new employment in a society of mass unemployment. They do not need to be told that social security benefits involve a decision about the amount of money on which a human being can be kept alive. Fear and anxiety makes people agreeable to comply. The risk of unemployment and financial insecurity renders obedience a prudent response to government policy and managerial decision. In other words, social resistance against a policy of state austerity was replaced by individualised struggles to maintain existing positions of employment, income and conditions. The transformation of a property owning democracy into a republic of debt meant a control of social relations through fear of unemployment and financial ruin. The collection of unpaid debt during the 1990s through repossessions, evictions, collapse of consumer credit and living on less in order to service interest obligations imposed upon the republic of debt the principle of the free market: pay-up or else!

The increase in unemployment, and the risk of personal bankruptcy, supported a dramatic squeeze on both private and public sector wage levels. According to a CBI survey, 'manufacturing pay rises between April and June 1993' were the 'lowest for at least 16 years' (German, 1993, p. 17) [12]. In the public sector, excluding managers and administrators, pay increases were very low and were held back by a public sector wage freeze at 1-1.5 per cent for 1993-4, now extended for a second year. Against the background of the tax increases in 1994-95 by £8.4 billion above their level in 1992-93 and a further £8 billion in extra taxes to be imposed between 1994-95 and 1996-97, there appears to be no let-up in the attempt to lower wages and to restrain spending power through fiscal pressures. Although unemployment increased markedly during the 1990s, the rate of unemployment appeared to drop from 1993 onwards. However, by Spring 1994, almost half a million people (460,000) counted by the government as in work were in reality either on government training programmes or existing as unpaid family workers (Employment Gazette, October 1994, Table 7.1). Of the remaining 24.5 million workers in the UK, 18.5 were in full-time employment whilst 6.0 million had part-time work. The increase in employment concealed the loss of 40,000 full time jobs compensated by the creation of 144,000 part time jobs (Financial Times, 23.4.94). Despite the increase in employment, the total number of working hours in the UK continued to fall (ibid.). The Department of Employment recorded in Spring 1994 that redundancies were running at the same rate as in Autumn 1993, with manufacturing employment hit the hardest suffering monthly falls in employment of 6,000 workers in May and 9,000 in June 1994. Even after the government's attempts to redefine, for statistical purposes, the concept of employment, the seasonally adjusted rate of claimant unemployment stood at 9.2 per cent of the workforce in the Summer of 1994.

V. Social Division and Responsible Citizenship
During the 1980s, debt, precarious work, and the daily struggle to make ends meet were largely confined to the working class. 'Tory voters have looked on happily as employers' rights to determine pay and work conditions have been steadily increased, never thinking casualisation would come to them. The ready capacity to hire and fire was meant to enable the Tory-voting classes better to manage the wage bill of the working classes, whose lives they regulated' (Hutton, 1994, p. 2). [13] The erosion of positive rights and entitlements associated with the Keynesian era had been pushed aside during the 1980s: the right to welfare was attacked; the right to employment disappeared; the right to housing was delegated to market forces, the right to health care became more and more selective; the right to education was eroded; the right to enjoy values other than material gains was restricted to those financially able to entertain a happy life. Rights were redefined: instead of the right to employment, the right to go in search of employment ('get on your bike') was proclaimed. Other rights either disappeared or were severely restricted: the right to campaign for higher wages, health and safety standards, for example, became more and more restricted, if not abolished altogether. [14] The erosion of 'rights' coincided with the privatisation of services, deregulation of wage protection and the encouragement of private insurance against risks, such as ill-health.

However, 'debt' is a great 'equaliser', and also a force of social division. The discipline through debt, job uncertainty, economic insecurity and psychological distress has reached the middle classes. As Hutton (1994, p. 2) indicates, with 'personal debt in relation to post-tax income now the highest in the industrialised West and house prices drifting, nobody can be carefree'. The imposition of financial insecurity needs to be seen against the background of rising unemployment and the creation of new types of employment. 'Full-time jobs only represent three fifths of Britain's jobs' and only 'a fifth of new jobs are the full-time pensionable jobs that the middle classes used to cherish' (Hutton, 1994, p. 2). The norm is part-time work, self-employment or fixed contract jobs. This norm is not new. It used to be the norm for the unskilled and semi-skilled and unemployed, and of those in low-paid employment. This has not changed. What has changed is that people like the junior manager, the partner at a City firm and the university lecturer participate unhappily and reluctantly in the new world of uncertainty and distress.

The consequence of the 1980's expansion of credit is the 1990's generalisation of a policy of social dumping. The differentiation between the unemployed and low paid, on the one hand, and the employed at the higher end of the wage scale, on the other, is changing its form. The so-called two-third society of the 1980s has been broken up into one-third societies. The marginalised are joined by the nearly marginalised. The policy of austerity divided the former two-third into the 'newly insecure' (cf. Hutton, 1993) and the full time pensionable employed. The latter are covered by collective bargaining and enjoy employment rights associated with the so-called affluent society of the 1950s and 1960s. The 'newly insecure' are those at the 'upper end of income distribution' but in casualised short-term employment and with considerable mortgage debt (ibid.). The division of social relations according to income and conditions is not new. However, it is being recomposed. From the 1960s onwards it existed in the form of a consumer society which was supported by full-time, pensionable income for the majority of the working population. Since the late 1980s this applies, as Hutton argues, only to one third of the population. Although still employed 'to manage the life of the working class' (cf. Hutton, 1994), the middle class are at risk of 'proletarianisation'. Their debt burden is made worse through cost saving reductions in the white collar labour force, the risk of unemployment, attempts to improve efficiency through intensification of work, casualisation of employment and wage pressure (including the extension of performance related pay to hitherto protected professions). The attempt to make bureaucracies and government institutions leaner and fitter, has not only involved the intensification of work but, also, financial distress, imposed premature retirement, unemployability at middle age as well as anxiety and fear that the intensification of work means growing uncertainty about future employment. Jobs for life are under threat and the reorganisation of the health service, higher education, financial business and the banking system, and Westminster's bureaucracy, make the condition of the middle classes more and more comparable with those of the working classes. The management of the life of the working class is, itself, casualised and made more efficient in terms of cost and intensity of work.

Compared with the 1980s, the Major governments are not just treading the same path as the Thatcher governments. They do so under fundamentally changed conditions. Under Major, 'rights and entitlements' associated with the institutionalisation of labour's political power after the second world war, continued to be pushed aside. However, while continuing the policy of deregulation, labour market liberalisation and the tough public order policies of the Thatcher period, it failed to win the approval of traditional Tory supporters. The Major governments are unpopular not because of their deflationary policies but because deflation hurts those who benefited from the policy of state austerity of the 1980s. Although the Major administrations failed miserably to balance their books, they were successful in reducing inflation to a record low. [15] However, the costs are grave: traditional Tory support amongst the middle classes is being alienated. This was expressed in their revolt against the poll tax, especially the component of business rate. The anti-poll tax movement raised the issue of a politics of debt to the level of mass resistance against the awesome power of money (see CSE, 1989; Holloway, 1990). Opposition to the tax straddled wide sections of society, including small business. Similarly, non-payment of the poll tax was advocated for a number of reasons, ranging from liberal conceptions focusing on the 'unfairness' of the tax to those emphasising class politics. The homogeneity of the movement was not achieved so much through political organisation but, rather, through the money form itself. It was through its resistance to the imposition of tight money that the movement achieved cohesion, unity and direction, rendering it a politically destabilising force. For government, the insubordination to the rule of money involved the risk that the social conflict transformed from a 'constructive' conflict to a 'destructive' conflict.

The characterisation of 'conflict' as a constructive conflict [16] is intrinsic to the notion of a pluralist society and has been influential in the study of a variety of fields such as industrial relations [17] and theories of parliamentary democracy. [18] The understanding that conflict is endemic in a pluralist society does not mean that conflict should be provoked. It means that rules, procedures, and laws etc., are invoked which regulate conflict and through which conflict can express itself in 'constructive' forms. Underlying the disorganisation of class relations into relations of pluralist interests and conflicts is a policy of responsible citizenship defined by entitlements and political as well as social rights and duties. This policy does not aim at ending the position of the working class as a labouring commodity but, rather, at confining its struggle and aspirations to a pluralist conflict over distribution and conditions. The position of the working class in the production process is not questioned. Rather, the aim is to undermine proletarian consciousness and therewith the political constitution of proletarian discontent and struggle. The working class is thus treated as a specific interest group amongst others in society, defined by its income resource and consumer habits. The politics of responsible citizenship involves the denial of the question of exploitation in favour of an acceptance of the wage relation. In other words, the despotic regime of exploitation is disguised as social relations are contained in the republic of the market. Discontent is channelled into the ballot-box allowing a choice between 'competing parties of the same kind' (cf. Kirchheimer, 1957, 1966). All groups in society are called upon to contribute 'equally' to the improvement of economic conditions, subordinating aspirations, such as decent income and conditions, to so-called national interests. However, any 'constructive conflict' does not lack its destructive potential. Social conflict and discontent questions existing rules and procedures and so raises the issue of political power. The disorganisation of class as class seeks to replace rebellion by wage conflicts and the question of political power is replaced by competing party political managers interested in the maximisation of votes and the marketing of conventional wisdom, especially during times of elections. Whether social conflict can be contained within existing forms or whether it is conducive to the reform of rules, or whether it develops to a serious political challenge, are open questions.

The anti-poll tax movement opened the Pandora's box. Government's response was swift: criminalisation and conciliation, abolition of tax, change of Prime Minister, and the depoliticisation of economic policy by joining the ERM. Government exploited the limited focus of the anti-poll tax movement and demobilised its momentum. The concern of the anti-poll tax movement was too narrowly focused on the imposition of the poll tax and it failed to widen the campaign to a broader mobilisation against the rule of money. This led the movement to dissipate with the abolition of the tax under the incoming Major government. The success of the anti-poll tax campaign to force government not only to abolish the tax, but also to force Thatcher's resignation, should not be underestimated. However, its limited focus allowed the Major government to shift emphasis by focusing on the exchange rate of the pound as an anchor of monetary tightness. As Sandholtz (1993, p. 38) indicates, 'for government that found it difficult domestically to achieve monetary discipline, EMU offered the chance to have it implemented from without'. [19] For the UK, membership was largely motivated 'by the expectation of benefiting from its disciplinary effects' (ibid., p. 28). At the same time, ERM-membership allowed government to 'shift the blame for necessary adjustments to an international regime, thus evading electoral punishment' (Busch, 1994, p. 84).

Throughout the 1990s, there has been a groundswell of discontent and government has been treading on thin ice. Although the Major government had hardly the money available to buy itself out of problems, it engineered a pre-election pay-off by increasing levels of public spending in 1991-92, retreating from and avoiding a number of 'potential industrial confrontations' (German, 1993, p. 11). Further, the level of non-payment of the poll-tax remained high under the incoming Major government. Despite the abandonment of the poll tax in March 1993, thousands are either still being taken to court or threatened with poindings for being irresponsible by refusing to pay outstanding poll tax bills. Further, the groundswell of discontent is indicated, amongst other things, by the public outcry over the pit-closure programme, the support for the Timex workers, nurses, ambulance drivers, and signalmen, the barrage of criticism over fiscal policy, civil disobedience against motorway construction, and the campaign against the Criminal Justice Bill. All these manifestations of discontent did not amount to a sustained challenge and either dissipated or did not mark significant victories. They indicate, however, that government has to be circumspect and that its attempt at socialising debt is based on precarious foundations.

The differentiated mixture of attack and conciliation changed form after the suspension of sterling's membership in the ERM. Although the support for the miners in Autumn 1992 forced government to delay its pit-closure programme, closure was imposed on a much larger scale. Wage ceilings in the public sector have been implemented since the pound's collapse and the level of taxation increased to a record high. A policy of fiscal tightness involves a more subtle attempt than monetary tightness to make people pay for the increase in debt. This is because, it involves apparently conciliatory elements through the system of rebates and specific concessions. At the same time, it makes resistance much more difficult: many direct taxes are reduced at source and indirect taxes, such as VAT, are raised over the counter. Further, progressive taxes, such as the council tax which replaced the poll tax, appear to be fair and just, so supporting the notion of the state as neutral arbitrator presiding over the pluralist conflicts amongst responsible citizens. Further, after the forced exit from the ERM, government set out to resolve political crisis by reinforcing social divisions, using the language of 'citizenship' in an attempt to channel conflict into constructive forms. [20] However, first of all, government took the unpopular decision to close most coal mines. Although the miners were hardly a political force since the strike of 1984-5, they represented, nevertheless, a focus for militant opposition capable of challenging government. After the miners, the Major government targeted beggars and lone mothers, reinforcing social division by distinguishing between 'scroungers' and those whose property owning dreams had turned into a nightmare. The rational behind the orchestration of moral panics was to divide social relations between the 'responsible' citizen and the 'irresponsible' element, that is, between those who tried hard to maintain their condition and those who, apparently, called upon the state to support a life outside productive work. While Major's back to basics campaign threw some light on the 'Victorian' sexual practices of some Conservative members of parliament, the connection between the depiction of lone mothers as irresponsible members of society who are having children to gain benefits was not only distasteful but, also, symptomatic: people forced to live in miserable conditions are identified with their condition, making them outcasts in the eyes of those who proclaim in favour of decency and easily exploitable for a policy which emphasises the moral values of poverty. To use a phrase used in the late 1970s by Keith Joseph and Jonathan Sumption, 'poverty is not unfreedom' and being 'married to the state' is the denial of freedom. The so-called 'dependency culture', upon which the above phrase focuses, is the denial of freedom because it rejects enterprise and responsibility and calls, instead, upon the state to violate individual freedom by supporting those who lack enterprise.

The vilification of beggars and lone mothers is not surprising and is more than just a repeat of earlier excesses of the Thatcher era. It amounts to a desperate attempt to overcome political crisis by securing the support of traditional Conservative voters. Vilification aims at smoothing fears of the middle classes of being 'mugged' by those left unwaged in a waged society. At the same time the traditional backbone of Conservative support is called upon to pay up. Their proletarianisation notwithstanding, fear and anxiety are exploited in an attempt to prevent solidarity with those whose poverty stands as a warning of a nightmarish future. Vilification can be interpreted as an attempt to undermine solidarity and social cooperation against a policy of austerity. It helps to divide social relations in terms of income groups and reinforce this division by setting different income groups against each other, forging a climate of distrust amongst these groups who, at the same time, are all trusted by government to pay the price for economic recovery. The other side of government's vilification is the issue of 'responsibility'. Government calls upon the population to trust its judgment and handling of the economy and urges those adversely effected by its policies to refrain from showing sympathy with the plight of beggars and single mothers. Solidarity with, government pronounced, villains is discouraged: all those who live a decent live are given an opportunity to distance themselves from irresponsible elements and to show responsibility by shouldering the burden of economic adjustment without question. The issue of 'responsibility' is specific: it defines the acceptance of hardship and deteriorating conditions as being in the national interest. Responsibility on the part of the individual is thus defined as a matter of national revival. The neo-liberalist conception of the empowered individual and its definition as an enterprising agent on the market, on the one hand, and the endorsement of individual responsibility, on the other, are two sides of the same state sponsored coin. The neo-liberal retreat from the state has meant a direct (re-)commodification of many aspects of social life and the enterprising individual is called upon to use the new found empowerment to make ends meet. The defiant protester and striker stand for all that which is harmful to the national interest. The stigmatisation of beggars and lone mothers as undesirable and irresponsible, is symptomatic: Behind the facade of moral high mindedness lurks the fear that solidarity and social cooperation might disrupt the fragile social fabric of atomised, debt-ridden and hard working people.

Against this background, Major's back to basics campaign and his talk of a classless society are much more than electoral devices and ideological window-dressing. Back to basics means the abandonment of fictitious wealth creation through credit expansion and a return to the old values of 'pray and work': [21] Rather than accumulating debt on future income, the demand is to act responsibly, to trust government's wisdom and thus to accept what it has in store and comply with its dictate. In other words, the responsible citizens are called upon to live not only within their means but also to consume less than has been produced in order to reduce deficits. Acceptance of lower wages, deteriorating conditions and intensification work, as well as the tailoring of life around material gain, rather than single motherhood, is endorsed as a civic duty. In this context, the issue of citizenship becomes specific. It has been raised by Conservatives, Liberals [22] and the reformist Left. Douglas Hurd endorsed the notion of 'active citizenship', indicating that the time had come to shed Thatcherism's image of self-interest, greed and selfishness and to replace it by the virtues of self-help combined with moral obligations to support worthy causes. [23] The Left, particularly those connected with the former Marxism Today, New Times and the New Statesmen, proposes a Bill of Rights, constitutional reform and endorses the notion of a caring Britain. It espouses the idea of 'citizenship' in terms of rights, challenging both 'the unfairness and amorality of the market and the diffusion of responsibility brought about by large-scale industrial socialism'. It seeks to find a 'third' way between the market and state organised capitalism 'by linking a strong individual ethic with a new affirmation of what it means to live as part of a community' (Mulgan, 1991 p. 38). Despite the differences between these approaches, all endorse a critique of neo-liberalism and social democracy (i.e. the Labourism associated with Keynesian policy) in favour of communitarian values, community cooperation and self-help. The role of the state is no longer seen as coordinating production. In the 1950s, the Left's conception was linked to the postwar welfare state. This state was seen as providing a new common experience of real socialism (cf. Marshall, 1950). The new Left debate on citizenship has turned its back on 'state-organised socialism' and endorses a social capitalism with 'real' individual freedom and choice. The role of the state is emphasised in moral terms: to supply help for those who help themselves. The emphasis on the moral dimension of state action endorses essentially the Christian Democratic values of an ethical socialism where the state helps those who help themselves. [24] The state is thus charged with granting people entitlements in the market where individual awareness of injustice will help to rectify gross discrepancies.

The issue of social justice is attractive. The promise is that misery and hard and non-rewarding work in the present is a condition of prosperity in the 'long run'. This image is seductive especially against the background of mass unemployment, poverty, homelessness and financial distress. However, before we let ourselves be seduced we will first have to return to basics. Governments, not only in Britain, but all over the world, are preaching the gospel of rising productivity and competitiveness. The promise is thus that fewer and less paid workers will produce more. However, under current conditions, rising productivity translates primarily into higher unemployment, further closure of productive capacities and financial turmoil. Does 'classessness' indeed mean generalised poverty, job insecurity and financial distress rather than a return to the 'affluent society' of the 1950s and 1960s which captured the imagination of so many?

VI. Conclusion
The espousal of the notion of 'citizenship' by all major parties is symptomatic. It raises the virtues of civic duty and responsibility and emphasises social 'rights' in terms of property rights. The call for 'citizenship' has an apparent progressive ring to it. It summons equality, justice and freedom. Social relations are not perceived as class relations but as relations between individualised property owners endowed with abstract rights. The neo-liberal retreat from the state is thus legitimated through the language of the Enlightenment. The emphasis is on the civic virtues of responsibility and trust in the state, espousing the idea of the loyal and law-abiding citizen, which is empowered to utilise property for both selfish purposes and the common good. [25] In the context of a republic of debt, the demand is thus that law-abiding and empowered individuals recognise their duty to struggle on to make ends meet. Compliance with harsh conditions, espousal of the ethics of hard labour and the acceptance of the rule of money, is endorsed as the citizens' duty. The republic of debt is thus seen as the framework within which the rights of citizens subsist. Within this context, the role of the state is to preserve justice, that is, to impose upon social relations the condition of their existence, that is, the free and equal citizen who recognises the duty and responsibility entrusted upon it by virtue of the ownership of property, including the ownership of labour power.

The debate on citizenship should be taken seriously. Though, it should be deepened and not restricted to legitimise the social engineering of discipline. It should be taken on in the tradition of Enlightenment thought: Doubt everything!


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[1] This article arises out of a wider project conducted with Peter Burnham and Alice Brown, which will appear as A Major Crisis? The Politics of Economic Policy in Britain in the 1990s, Dartmouth, Aldershot.

[2] A conceptual analysis of the relationship between debt and class struggle can be found in Bonefeld/Holloway (1995).

[3] See, for example, Ford (1998,1991); Berthoud/Kempson (1990); Kempson et al. (1994); and Alcock (1993).

[4] In Britain, by the late 1980s, there were approximately 1.1 million lone parents, of whom 910,000 were lone mothers (Millar, cited in Ford, 1991).

[5] See the contributions to Michie (ed.) (1992).

[6] The following part is close to Bonefeld/Holloway (1995).

[7] On the global character of capitalist development and prostitution, see Dalla-Costa (1995).

[8] The above and subsequent data can be found in McKie (ed.) (1993, 1994) and Smith (1993) and German (1993). The data on the housing market for 1993 can be found in Financial Times , 27th of January, 1994.

[9] The bad debt exposure of some of the leading banks was so dramatic that some commentators, like Anthony Harris, considered that government should nationalise banks (Financial Times, 19.10.92).

[10] The negative PSBR stands for a public spending surplus.

[11] The uniform business rate was part of government's Community Charge (Poll Tax). It replaced 'non-domestic rates levied by local authorities on commercial and industrial properties with a national non-domestic rate' which was 'set each year by central government and collected on the basis of a single, common rate poundage'. The re-evaluation of rates led to substantial increases in the rate bills. Government was regarded as having betrayed the loyal support of small business and commercial enterprise. The business community reacted by organising a 'revolt of its own'. In some areas, especially in the South of England, non-payment campaigns were organised (Stoker, 1991, pp. 181, 190).

[12] See Panitch (1986) for an analysis of the wage-squeeze during the 1970s.

[13] The following part is indebted to Bonefeld/Holloway (1995).

[14] For example, in the UK, the young unemployed on government sponsored training schemes are not regarded as employed by the Department of Social Security. That means they are not entitled to industrial injury benefits.

[15] The reduction in the rate of inflation under Major is quite unprecedented. Its nearest equivalent was the reductions under Callaghan in the 1970s (see Jay, 1994).

[16] A theory of the 'functionality of conflict' is presented, for example, by Coser (1956) and has been developed within the Marxist framework by Poulantzas (1973) and Hirsch (1991).

[17] See the work of Flanders (1970) and Fox (1966) For an assessment: Hyman (1989).

[18] Modern variants of the interrelation between constructive conflicts and the building of democracy can be found in the work of Held (1986, 1989), Keane (1988), and the contributions in Andrews (1991) as well as Hall and Jacques (1989). For a critique of such a view: Agnoli (1990, 1992); Bonefeld (1992) and Clarke (1991).

[19] The ERM is phase one of the European Monetary Union whose final stage is complete convergence of members' currencies.

[20] Under Major, new trade union laws and the reform of public sector employment were legitimised through the introduction of 'Citizen Charters'. On the reorganisation of the public sector employment: Fairbrother (1994).

[21] 'Pray and work' is a well suited description of the socialisation of debt during the 1990s. It derives from the monastic rule of 'ora et labora'. The Roman means of control through bread and amusements ('panem et circenses') would be much too expensive. However government tried hard, although unsuccessfully, to provide amusements to strengthen its credibility. David Mellor's resignation as Minister of Heritage and as the self-appointed 'minister of fun' in 1992 indicated government's difficulties and the vilification of lone mothers during Major's back-to-basics campaign misfired miserably: the Conservative party found itself to be at the centre of modern versions of cheap entertainment as sex scandals broke. The Major government is also hoping to overcome political crisis by presiding over the provision of bread. John Redwood (Secretary of Wales) described government's future strategy as follows: 'Looking to the future, I see a good period for strengthening and broadening the base of popular capitalism' (Interview in the Independent, 3.9.93). In other words, the monastic rule of pray and work is only transitory and will be replaced by panem et circenses. We know what 'panem' looked like in the 1980s and government's own brand of 'circenses' is, indeed, amusing. However, amusement can not be sustained on a cheap basis for long as David Mellor now knows only too well.

[22] Paddy Ashdown showed his commitment to community spirit in his Citizens' Britain.

[23] See the introduction to Andrews (ed.) 1991.

[24] In Germany, the left of the CDU is committed to an ethical socialism of self-help. This issue is construed in terms of 'subsidarity'. On the British Left's endorsement of Christian Democracy: Clarke (1990).

[25] The endorsement that property is an individual right which carries social obligations, confirms the new found interest in Germany's 'social market economy' (see Basic Law, Articles 14 and 15; for comment: Bonefeld, 1992).