Introduction

This chapter will unravel several myths about debt relief, primarily that the growing prevalence of debt relief is due to a lessening of stigma, that is, that people are no longer ashamed to go bankrupt. Instead, I will present the case that the growth in the usage of insolvency is best explained by the vast expansion of household indebtedness over the past 50 years combined with the modernization of debt relief, both of which happened concurrently. Further, usage of debt relief is cyclical, structural, and driven by policy. From the standpoint of political economy, usage of debt relief is driven more by the booms and busts of the business cycle than by cynical debtors seeking to escape from their obligations.

The discussion in this chapter is presented in two parts. The first part argues that the ideological supremacy of neoliberalism after the 1980s led to policies that created the economic and social conditions for a deluge of debt, within which we remain trapped. The second part charts how the liberalization of lending that has led to us becoming so indebted was simultaneously accompanied by the modernization of debt relief. This means that the pivot towards debt relief was a deliberate policy decision within many Western governments and was not due to a sudden moral vacuum among borrowers.

Everywhere we look, debt seems to have grown beyond our ability to control it. Americans now owe an eye-watering $12 trillion in mortgage debt, approaching the $14 trillion record from just before the financial crisis (New York Federal Reserve 2023; De Vise 2023). Unsecured debt has likewise expanded dramatically, with the average American now having four credit cards and a grand total of a trillion dollars owed across the country (White 2022). As I write these words, student loan debt in the US has just crested over $2 trillion, which has sparked significant debate in the public sphere due to it being one of the few forms of debt that cannot be discharged in bankruptcy (Martin 2005; Haverstock 2023). One wonders how this debt could possibly ever be repaid, but of course the secret of the system is that it must constantly expand in order to survive (Featherstone 2020).