The problem of debt

Ever since the financial crisis of 2008, debt has been seen as a problem. Not just public debt—about which we are constantly hearing - but private debt too. Governments, people, businesses and banks are over-indebted and struggling to survive. Banks have failed and been bailed out by governments: people have lost their homes and their jobs: businesses have failed, particularly in the construction industry: governments have enacted painful spending cuts and tax rises to get public debt under control: some governments have defaulted on their debts.

In its simplest form, debt simply means an obligation. When someone has done something for us, freely and without payment, we say “I am in your debt”, and we intend to “return the favour” at some time. That is a debt—but it is a debt voluntarily entered into between two people who basically like each other. The “debt” is no debt if it the service from which it arises is done out of love.

Debt becomes a problem when there is no love between the participants—when it is either a business deal or exploitation. In its worst form, debt can be a form of bondage: human trafficking often involves loading those trafficked with debt that they can never repay, which prevents them escaping from their life of servitude. But debt freely entered into can also become a problem, if the debts become unpayable, for example if the debtor’s income falls. That has become the situation for far too many people in the last few years. Real incomes have fallen by 10% since the financial crisis, which doesn’t sound too bad until you realise that the top 1% have seen their incomes rise in the last three years…..many people’s incomes have fallen by far more than 10%. For people who perhaps took on too much debt in the years before the financial crisis, an income fall of that magnitude is crippling. Many people who could comfortably manage their debts prior to the crisis are now struggling to make ends meet. All around us there is evidence of distress: increased referrals to foodbanks, increasing use of payday lenders, increasing rent and mortgage arrears, people struggling to pay energy bills, children arriving at school hungry.

Debt, sin and forgiveness

Our attitude to debt is deeply coloured by our moral values. I am constantly struck by the criticism implied in the word “debtor”, particularly by those who have no debt themselves—even though they may have had debt in the past. Debtors are routinely described as “profligate” if they are unable to pay their debts, even if at the time that they entered into those debt agreements their income was easily sufficient to service them. It seems that morally, we are not far removed from the time when debtors were consigned to prisons such as the Marshalsea until they could pay their debts. Imprisoning debtors is mentioned by Jesus in the parable of the unmerciful servant in Matthew 18:21-35, who was forgiven by his master for gross debts but then demanded payment in full from everyone who owed him money, however small the amounts. His master found out about it and cast him into prison “until he had paid everything he owed”. But Jesus’ point is not that unpayable debts deserve imprisonment. Far from it. His point is that debts can, and should, be forgiven. In our criticism of those who, for whatever reason (including mismanagement of their finances and outright overspending) have amassed unpayable debts, we seem to have forgotten Jesus’ criticism of the man who showed no mercy to his debtors. In Jesus’ eyes, it is those who will not forgive debts who should be imprisoned. After all, God has forgiven us far, far more.

Some of you may think I am misusing this parable. After all, it is really about forgiveness of sins, not debts. But debt and sin are closely related—so closely that in the Bible the two words are used interchangeably. And in German, the word for “debt” and the word for “sin” are the same: “Schuld”. If you think about it, “forgiveness” is always about wiping out an obligation that cannot be met—and if ever there were an obligation that cannot be met, it is our obligation to the God who created us and from whom we have turned away. We are deeply, deeply indebted to Jesus, who took upon himself the burden of our debt to God. But remember that an obligation founded on love is no obligation. Jesus took the burden of our debt upon himself out of love, and in so doing freed us from any obligation except to love him in return. That is how the slavery of sin becomes the freedom of love. 

We could choose to forgive financial debts. But as a society, we have forgotten how to do this. Instead, we force people—and, in Europe, whole countries— to maintain debt service even at the expense of essential living costs or at the price of going even deeper into debt. Borrowing at ever higher interest rates to service existing loans inevitably leads to default, but loan sharks make a lot of money from people in this death spiral….and loan sharking, it seems, is becoming respectable. 

Judith Armitt, Lay Reader at All Saints Church, Frindsbury, recently gave a sermon in which she criticised lenders who exploit the vulnerable. She cited St. Paul’s list of morally unacceptable practices in Colossians 3:1-11:

“Since, then, you have been raised with Christ, set your heart on things above…..not on earthly things…..Put to death….whatever is in your earthly nature: sexual immorality, impurity, lust, greed, anger, rage, malice, slander, filthy language. Do not lie to each other.”

Highlighting greed and lying, she castigated Wonga and other high-interest payday lenders:

“Don’t pretend then it’s all right to lend to people who have very little, at huge rates of interest they shouldn’t have to pay”.

She is in good company. The Archbishop of Canterbury recently criticised payday lenders for their astronomical rates of interest, and committed the Church to supporting and if necessary creating credit unions as direct competitors to payday lenders, offering short-term loans to those who need them at much lower rates of interest. It remains to be seen how well his initiative succeeds: the Church is already creating a staff credit union, and the Government is supporting the Archbishop’s scheme.

However, not everyone is convinced this is such a good idea: after all, if someone is so deeply in debt that they cannot afford basic essentials, it is debt relief and/or higher income they need, not more debt even at lower rates. We perhaps need to think about how the Christian concept of forgiveness can be brought into the way we deal with people who have got into financial difficulty.

The other side of debt

But what about the other side of debt? What about the people with plenty of money?

Jesus’ parable about the rich fool (Luke 12:13-21) describes someone with more wealth than they know what to do with:

“The ground of a certain rich man yielded a good harvest. He thought….what shall I do? I have no place to store my crops. I will tear down my barns and build bigger ones, and there I will store my surplus”.

Judith comments that if we replace “crops” with “money”, maybe the modern equivalent is opening a new bank account because the first one is full to the limit, or buying shares or bonds on top of the money stored for a rainy day. Jesus is not necessarily saying “don’t save”: the story of Joseph (Genesis 41), for example, reminds us that we need to put some by in the years of feast, to be ready for the time of famine—if we’re made redundant, for example, or to provide for ourselves when we are too old to work. But the story of the rich fool tells us there is no point in storing up more than we need for that rainy day. For God says to him,

“You fool! This very night your soul will be demanded of you, and who will have then what you have prepared for yourself?”

You can’t take it with you. Better to spend it on something productive, perhaps by supporting local businesses or funding projects that benefit people in developing countries.

But far worse than sitting on barns full of unproductive riches is lending them out at high interest rates to people who are desperate. And far too many of us want to do exactly that. We have come to expect to live on the interest from our savings, rather than on those savings themselves, so we want to receive a good rate of return on our savings and investments. That works in the good times, if the money is lent to enterprises that use it to create economic growth. But in the bad times, when the economy is not growing, living on the interest from savings can only be done by extracting money from other people, many of whom are too poor to save, through cutting their wages, reducing their benefits, raising their taxes, eliminating their jobs. How is this compatible with Jesus’ teachings? Savings are designed to be used productively. If they can’t be used productively by others—which is what very low interest rates indicate—use them productively yourself. Spend them, or give them away.

A tough challenge

The Archbishop of Canterbury urges us to act as Christ would do. But do we know what Christ would do, faced with a society weighed down with unprecedented amounts of debt? After all, in Jesus’s society, debts were wiped out every fifty years. Perhaps we, too, need debts to be wiped out. But of course that means that those who lent that money will lose it. And we really do like to hang on to our wealth.

Yet Christ had nothing (Luke 9:58), and he sent his followers out with nothing (Matthew 10). If we are to act as he did, we perhaps need to “sell all we have and give to the poor, and come, follow Him” (Mark 10:17-23).