"Money's capacity to turn morality into a matter of impersonal arithmetic . . ."

I'd been reading David Graeber's Debt: The First 5000 Years so I had a newly focused understanding when I read this sentence from the LA Times story on the pending Detroit bankruptcy settlement:

"The creditor was frustrated that a deal had been reached to transfer the works in Detroit Institute of Arts to a public trust and use foundation money to nearly make city pensioners whole, while other creditors were expected to receive pennies on the dollar."

The unusual part of this story is that the pensioners would be paid before the money creditors and their insurance companies. 

Why is this unusual?  Because usually the bankers get paid first - as we know from the housing crash when the bankers, who pushed lenders [borrowers] into loans the bankers knew the lenders [borrowers] couldn't pay, got paid, while homeowners lost their houses.

Graeber argues that our unquestioned moral certainty that "people must pay their debts" makes it easier for bankers and other lenders to enforce collection of debts, even if the conditions were impossible for the borrower from the beginning. 

He discusses how to distinguish between moral obligations and debts.  This is, he says, the basic question of the book.

"What, precisely, does it mean to say that our sense of morality and justice is reduced to the language of a business deal?  What does it mean when we reduce moral obligations to debts?  What changes when the one turns into the other?  And how do we speak about them when our language has been so shaped by the market?  On one level the difference between an obligation and a debt is simple and obvious.  A debt is the obligation to pay a certain sum of money.  As a result, a debt, unlike any other form of obligation, can be precisely quantified.  This allows debts to become simple, cold, and impersonal - which, in turn, allows them to be transferable.  If one owes a favor, or one's life, to another human being - it is owed to that person specifically.  But if one owes forty thousand dollars at 12-percent interest, it doesn't really matter who the creditor is;  neither does either of the two parties have to think much about what the other party needs, wants, is capable of doing - as they certainly would if what was owed was a favor, or respect, or gratitude.  One does not need to calculate the human effects;  one need only calculate principal, balances,  penalties, and rates of interest.  If you end up having to abandon your home and wander in other provinces, if your daughter ends up in a mining camp working as a prostitute [he'd given such an example from Nepal], well, that's unfortunate, but incidental to the creditor.  Money is money, and a deal is a deal."

Thus when the bankers call on the City of Detroit to pay up, the public outside of Detroit is primed to assume the city has been deadbeat and even though it's unfortunate, the banks have a right to take over the art at the Art Institute and get paid before retirees get their pensions.  

The Art Institute raises other issues to be argued about, but not here now.

But the retired employees also had a deal with the city.  They worked for years with the knowledge, based on a written contract, that after they worked a significant part of their lives they would get a pension. For many - particularly those in professional positions - they gave up the immediate higher pay and bonuses they could have gotten in the private sector for the pension.

Graeber's point is that by adding the moral imperative to pay one's debt to the business impersonality of 'a deal is a deal' lenders have gotten away with insisting on being paid, even if the lending conditions and paying consequences are inhumane.  Because humanity has been taken out of the equation.

"From this perspective, the crucial factor, and a topic that will be explored at length in these pages, is money's capacity to turn morality into a matter of impersonal arithmetic - and by doing so, to justify things that would otherwise seem outrageous or obscene. The factor of violence, which I have been emphasizing up until now, may appear secondary. The difference between a "debt" and a mere moral obligation is not the presence or absence of men with weapons who can enforce that obligation by seizing the debtor's possessions or threatening to break his legs. It is simply that a creditor has the means to specify, numerically, exactly how much the debtor owes."

I already knew something about how the language of instrumental rationality has taken over the language substantive rationality.   Very simply that means that the rational thinking processes we use to achieve a goal or solve a physical problem (say build a highway) are different from the rational thinking processes needed to consider moral questions (if the highway through a neighborhood is a good a good thing.)   I studied under Alberto Guerreiro-Ramos while he was writing The New Science of Administration, in which he argues that the distinction between the two different rationalities has been lost as people use instrumental rationality to resolve moral questions.  As when economists are called into court to help determine the value of the deceased's lost life, so the family can be paid off.     Guerreiro-Ramos

"was one of the earliest scholars to point to the risks of a social science that took homo economicus as its referent. A solution that he offered for this dilemma was to recognize the importance of non-market settings in which people could pursue other, non-materialist interests."

But I hadn't thought about - and that is Graeber's point - how the moral weight of paying one's debt assists international lenders in collecting their money even though the both the terms of the original loan and the consequences of collecting payment are unjust, even inhumane.

He does point out that the financial crisis of 2008 did loosen people's firmly held beliefs enough to get a conversation about this started.  But that has faded.  But the terms of the Detroit settlement seem to suggest that maybe there's been at least a little shift.

I do think this is an important book.  The previous post on it gave an example of international lenders unconscionable actions in Madagascar.  Here's another one from the book about Haiti.

But debt is not just victor's justice; it can also be a way of punishing winners who weren't supposed to win. The most spectacular example of this is the history of the Republic of Haiti - the first poor country to be placed in permanent debt peonage. Haiti was a nation founded by former plantation slaves who had the temerity not only to rise up in rebellion, amidst grand declarations of universal rights and freedoms, but to defeat Napoleon's armies sent to return them to bondage. France immediately insisted that the new republic owed it 150 million francs in damages for the expropriated plantations, as well as the expenses of outfitting the failed military expeditions, and all other nations, including the United States, agreed to impose an embargo on the country until it was paid. The sum was intentionally impossible (equivalent to about 18 billion dollars) , and the resultant embargo ensured that the name "Haiti" has been a synonym for debt, poverty, and human misery ever since. 

The whole book is online and I would encourage readers to at least bookmark it, but even better, read the first chapter.  It reads far more interestingly than people would expect from a book on finance. You can find the passages in this post by cutting them here and pasting them into the search at the pdf file of the book.