Who owes? Class struggle, inequality and the political economy of leverage in the twenty-first century

Abstract

The prevalent consensus in critical social sciences is that finance articulates the world economy as a global hierarchy of creditor-debtor relations that reproduce and further aggravate existing income and wealth inequalities. Class struggle is correspondingly understood as a conflict between elite creditors, who are members of the global top 1% of wealth holders, and mass debtors, who are burdened by growing costs of servicing public and private debts. This article offers an alternative understanding of how debt, inequality and class relate to one another. At its basis is the recognition that over the past four decades, finance has empowered upper class borrowers, including the top 1%, as it has magnified their capacity to generate capital gains and capture greater wealth and income shares via levered-up investments and other forms of positioning in financial and property markets. The article thus provides a political economy of leverage as power, showing how contemporary global finance has not given shape to a distributional conflict between creditors and debtors as two distinct classes, but instead has set debtors against debtors, and namely the greater borrowers against the lesser ones.

Islamic Social Funds to Foster Yunusian Social Business and Conventional Social Enterprises

“…In production functions, firms employ cost cutting to gain competitive advantages as price leaders or become price takers by monopolising and hegemonising and through illusive branding. Nevertheless, thanks to the exceedingly inconsistent wealth distribution system, a colossal divide and discrimination surface on the socioeconomic landscape (Karmakar and Jana 2022;Sgambati 2022).…”

Incendiary assets: Risk, power, and the law in an era of catastrophic fire

“…As mentioned above, in technical terms leverage describes borrowing to amplify returns. Hedge funds are masters of leverage in this sense, with “leverage ratios [that] are on average 4 to 5 times the value of their AUM [assets under management]” (Sgambati, 2022: 11). But Konings (2018) usefully approaches the concept of leverage in a less restrictive way.…”

Financial Eschatology and the Libidinal Economy of Leverage

“…While it is true that the expansion of both public and household debt has led to neoliberal austerity and rising family debt burdens for middleto-lower income groups, we must not forget that over the past four decades, borrowing has proven to be a boon for the wealthy. It is the primary lever by which new financial and real estate wealth has been acquired, and remarkable capital and rental gains have been made by the wealthier strata of society through borrowing for investment purposes (Adkins et al, 2020;Sgambati, 2022).…”

“…Yet this is not so. The logic of leverage has created a fractured society of debtors, fuelling a distinct form of class warfare among debtors (Sgambati, 2022). Class war in the age of financialization is a struggle between debtors and debtors, a struggle between the greater borrowers , the indebted rich who borrow to leverage, and the lesser borrowers , the burdened poor, who not only must pay back everything they borrow, but also must shoulder the cost of funding the rich’s indebtedness by way of austerity, regressive tax systems that favour capital gains, high rents, high living costs, and low wages.…”