A majority of Colombia’s rural areas now hold large levels of interest-bearing debt as a result of the increased popularity of bank credits. This article through interviews with debtor peasants shows that their lives have been transformed by the debts they have incurred—debt has generated an imperative to grow. In producing the necessary amount to fulfil debt, small-scale producers are pressed to follow principles of accumulation and profit maximisation that characterises the capitalist society.
The boom of bank credit and debt
Across rural Colombia, bank credit has become the major instrument for financing productive activities. This boom is relatively recent and it was marked by the 1989 National System of Agricultural Credit (Sistema Nacional de Crédito Agropecuario: SNCA), a law aimed to increase the availability of bank credit in the countryside.
In 2016, as part of my previous collaboration with rural credit institutions, I was sent to El Carmen de Chucurí (Colombia) to attest the expansion of bank credit and to document the types of creditors in the area. El Carmen de Chucurí is a municipality located in the northeast of the country that had recently been named Colombia’s most important hub for cocoa production. During my stay, I found that the rising production of cocoa had to do with specific rural development policies, but also and more generally with the necessity to produce in order to repay loans.
For debtor peasants in El Carmen de Chucurí, debt repayment is a constant source of fatigue and concern. The majority of their time and efforts is devoted to growing cocoa, a “commodity” that represents the necessary “liquidity” to fulfil their credit obligations. While the expansion of rural bank credit continues to be the subject of many studies, discussions of the nature of debt and being a debtor are neglected.
The growth-imperative debate: a research topic
In my MA research paper, I focused on the expansion of interest-bearing debt in El Carmen de Chucurí rather than on that of credit. I interviewed a number of cocoa growers – all members of a local cocoa marketing association– whose lives have been forever transformed by their relationship with debt. In order to repay the principal and the interests of the bank credits, debtor peasants have been forced to increase the quantity of their cocoa produce and its value. Put another way, debt has generated an imperative to grow.
This apparent straightforward correlation is at the core of an ongoing scholarly debate on the role of credit interests for economic growth[i] (Strunz et al., 2015). While some scholars argue for a nexus between credit interests and economic growth, the more standard narrative on money and growth seems to largely neglect this relation. Still within the first current, there are differentiated stances. One set of scholarly work is based on the assumption that there exists a natural propensity towards growth and that credit is only the conduct through which the latter materialises[ii] [iii](King and Levine, 1993; Schumpeter 1983). Another body of academic literature more critically engages with this correlation and departs from the recognition that there is nothing natural or inherent in modern paths of economic growth. Instead, the imperative to growth relates to a very specific mode of production, capitalism, that was marked by “deep and painful social transformations”[iv] (Wood, 2009: 37).
Debt as a disciplining device
The research found that in the case of El Carmen de Chucurí (Colombia), the pressures to repay and remain solvent have significantly transformed the lives of peasants. They have been forced to adopt “maximizing strategies” based on a specific (capitalist) form of economic rationality, which I labelled as a transformation of their mindsets. In parallel, debtor peasants have also been pressed to intensify their work routines at the expense of their health, as part of turning debtors into “flexible and docile” to meet repayment deadlines. I called this a transformation of their bodies. Theoretically, I argued that these changes could be understood as part of the overarching disciplining effects of debt.
Debt and development trajectories
The behavioural and social changes in the lives of debtor peasants have, in turn, shaped their own trajectories of development. In producing the necessary amount to fulfil debt, they are pressed to follow principles of accumulation and profit maximisation that characterises the capitalist society. Rather than an odd case in which rural household indebtedness commingles with high productivity margins and large rates of returns, this reading is pertinent to other contexts where debt, too, constitutes a mechanism that propels capitalist logic. In an attempt to unpack the disciplining effects of debt, my research tried to point at the close ties between debt repayment and economic growth, and among this correlation and the expansion of capitalism more broadly.
[i] Strunz S, Bartkowski B and Schindler H (2015) Is There a Monetary Growth Imperative? In: Leipzig, 2015. UFZ. Available at: http://www.ufz.de/export/data/global/67091_DP_05_2015_Strunzetal.pdf.
[ii] King R and Levine R (1993a) Finance and Growth: Schumpeter Might Be Right. The Quarterly Journal of Economics 108(3): 717–737. DOI: 10.2307/2118406.
[iii] Schumpeter JA, Opie R and Elliott JE (1983) The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle. New Brunswick, New Jersey: Transaction Publishers.
[iv] Wood E (2009) Peasants and the Market Imperative: The Origins of Capitalism. In: Akram-Lodhi AH and Kay C (eds) Peasants and Globalization: Political Economy, Rural Transformation and the Agrarian Question, pp. 38-56. London: Routledge.
Image Credit: Alice Pasqual on Unsplash
About the author:
Lorenza Arango Vásquez is a recent master graduate from the ISS (December 2018).
Gustavo DelgadoMarch 11, 2019
Why they got a loan? I think in order to increpase production and whith the additional income to repay the loan, the interest and get an additional income. If something was wrong ….. it is not the credit system. The paper has byes aproach