Over-indebtedness, and the policy trends fueling it, have devastating impacts on people’s lives. This essay argues that there is a mutual reinforcing relationship between booming levels of household and sovereign debt and the systematic deprivation of human rights around the world — which is why protecting these rights must be a core principle of debt justice.
"The harms to human dignity caused by over-indebtedness—whether individual or public—must be understood as a consequence of unjust policies which violate human rights."
On the one hand, governments face pressure to minimize public expenditure and to minimize levels of taxation. Rounds and rounds of tax cuts for corporations and wealthy individuals concentrate wealth (and power) and strain government budgets. Governments resort to borrowing on disadvantageous terms and conditions leading to unsustainable sovereign debt levels that squeeze their fiscal space even further. The stranglehold that high debt burdens have placed on the fiscal space of low and middle income countries has had dire consequences for their ability to respond to the COVD-19 pandemic.
On the other, lack of access to essential goods and services, coupled with financial deregulation, leads to predatory lending as households need to borrow more and more to maintain their standard of living — including covering their healthcare bills. Excessive interest rates, abusive contractual terms, criminalization of debtors and harsh collection practices become a burden, quickly turning into a never-ending cycle of debt and personal, family and social tragedies for many. This puts their rights to health, housing, food and other economic and social rights in even greater jeopardy. A deterioration in wellbeing is a common consequence. Vulnerability to exploitation is another.
Human rights standards provide a clear and relevant framework for our vision of debt justice
Economic and social rights — enshrined in the Universal Declaration of Human Rights, in widely ratified international treaties and in constitutions around the world — entitle everyone to the material conditions essential for dignity, freedom and wellbeing. This includes conditions of life and conditions of work, as established by the International Covenant on Economic, Social and Cultural Rights. By bridging “lives” and “livelihoods”, economic and social rights connect the spheres of production and of social reproduction.
Specifically, these rights guarantee that essential services such as healthcare and education are accessible, affordable, and of good quality; that opportunities for decent work are available; and that adequate living standards—underpinned by rights to food, water, housing and sanitation—are achieved for all. They envision a world in which the goods and services human beings need to live with dignity are not commodities, but entitlements to which everyone should have access without having to go into burdensome debt.
These rights guarantee much more than a minimum level of basic subsistence. Their “full realization” must be “progressively” achieved: they set a floor, not a ceiling. They demand continuous improvement and must be guaranteed for all, prioritizing the needs of disadvantaged groups facing systemic and intersectional forms of discrimination. These entitlements impose corresponding obligations on governments to “respect” peoples’ rights (treating people fairly and humanely); to “protect” peoples’ rights (taking action to prevent, investigate, and punish abuses committed by others, notably the private sector); and to “fulfill” peoples’ rights (taking steps to facilitate access to the goods and services necessary to realize rights and providing those goods and services when people can’t otherwise access them).
Committing to these standards of action means that guiding economic activity is a legitimate and expected role of government
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The realization of economic and social rights cannot be left to the whims of an unregulated market. It demands an active role for government in providing public goods and essential services that deliver for everyone, not just those who can pay; in mobilizing the “maximum available resources” for this purpose, including through responsible government borrowing; in redistributing resources to support the care work performed in households, including through comprehensive social protection schemes; and in regulating the conduct of the private (financial and non-financial) sector to protect the rights of workers, consumers, and communities affected by their business.
In practice, these obligations are routinely flouted by governments across the world. The policy trends that have accompanied the spread of neoliberal globalization include the commodification, privatization and financialization of public goods and essential services. The role of government in public provisioning has been drastically reduced—often at the behest of international financial institutions. Even in the pandemic, the World Bank is still financially supporting the private health sector instead of strengthening the public health system, for example.
This gap is filled by market-based, individualized solutions for those who can afford them: private hospitals, private childcare, private schools, private insurance, private pensions, private care homes. Labor market flexibilization and rollbacks in social protection—accelerated by years of austerity—make these services affordable to fewer and fewer people. Booming household debt is the result. The scale and seriousness of the economic and social rights violations that lead to, or are a consequence of individual or household indebtedness, illustrates that financial inclusion cannot be a proxy of improving living conditions.
It is clear that poverty and inequality, in a context of increasing financialization of public goods and essential services, push people into private debt. For this reason, the harms to human dignity caused by over-indebtedness — whether individual or public— must be understood as a consequence of unjust policies which violate human rights. And to protect those rights, we must stand behind clear and universal principles: needs trigger duties not debt; our lives are not commodities; our livelihoods must be secure, not securitized.
This essay is part of the series “A Vision of Debt Justice” of Progressive International’s Debt Justice Blueprint.