The Debt You Owe Even When You Owe Nothing
Neoliberalism’s defenders call it responsibility. Its critics call it discipline by insecurity. Both sides deserve to be heard—but only one side explains why success now feels like failure.
Capitalism once defended itself largely by pointing to what it produced: factories, trade, technological development, accumulated savings and expanding material abundance. Its neoliberal form makes a more intimate claim. It offers not merely an economic system, but a moral education.
The citizen must be responsible. The worker must remain employable. The student must invest in himself. The household must anticipate every emergency. The borrower must repay. The unemployed must retrain. The successful must keep growing. The struggling must improve his attitude.
Even the person who owes no money is encouraged to live as though he were indebted.
He must ask whether he has worked enough, saved enough, learned enough and planned far enough into the future. His education becomes an investment, his abilities become human capital, his personality becomes a brand and his future income becomes something to be managed in advance.
This is how debt becomes more than a financial instrument. It becomes a model of citizenship.
The neoliberal message is not simply, “Pay what you owe.” It is: live as someone who must perpetually justify his security through performance.
That claim deserves criticism. But criticism should begin by taking its defenders seriously.
The defenders’ case
To dismiss every market liberal as an apologist for creditors would be too easy. The defense of responsibility, interest and contractual obligation rests on arguments that are neither absurd nor entirely false.
Friedrich Hayek’s case begins with freedom. A society cannot genuinely grant individuals the right to choose, he argued, while systematically insulating them from the consequences of their choices. Liberty means both opportunity and burden. An individual, in Hayek’s words, “must bear the consequences of his actions” because responsibility allows learning, moral development and social coordination (Hayek, 1960, p. 71). (Institute of Economic Affairs)
This is the philosophical heart of the neoliberal defense. Without consequences, choice becomes theatrical. A person may claim the freedom to borrow, invest, resign, purchase, refuse or take risks, but others would be compelled to absorb every resulting loss. In that world, defenders argue, responsibility disappears while moral hazard expands.
Milton Friedman made a related argument against paternalism. The free citizen should not be treated as a dependent ward of government. Economic liberty requires that people be allowed to use their income, property and labor according to their own preferences. That freedom carries what Friedman called responsibility for one’s “own destiny,” rather than an expectation that political institutions should direct every outcome or repair every disappointment (Friedman, 1962/2002). (The New Yorker)
The point is not necessarily that all unfortunate people deserve their misfortune. It is that a system based on voluntary exchange cannot function when every undesirable outcome is retrospectively declared illegitimate. Contracts would lose credibility. Lending would become more expensive. Savings would be discouraged. People who acted prudently would be required to cover the decisions of those who did not.
The defense of interest follows the same reasoning. Ludwig von Mises rejected the idea that interest is simply a mysterious tribute paid to people who already possess money. Interest, in Austrian economics, arises from time preference: present goods are generally valued more highly than equivalent goods available only in the future. The lender gives up present command over resources and receives compensation for waiting, uncertainty and foregone alternatives (Mises, 1949/1998). (Mises Institute)
Mainstream defenses add risk, inflation, administration and opportunity cost. A lender may not be repaid. Money lent today may lose purchasing power. The capital could have been invested elsewhere. Interest therefore coordinates saving and investment by placing a price on the use of resources over time.
This argument has real force. A blanket prohibition on interest would not abolish the cost of lending. It could instead drive lending underground, restrict credit to personal networks, encourage hidden charges or deny financing to borrowers without wealthy relatives.
Credit can also enable production rather than merely extraction. A farmer may borrow for machinery, a household for a home, a student for training and a firm for equipment. The World Bank’s financial-inclusion framework argues that credit histories can create “reputational collateral,” allowing borrowers without conventional assets to demonstrate reliability and obtain better terms later (World Bank, 2016). (World Bank)
Gary Becker’s theory of human capital supplies another defense of individual investment. Education and training can increase a person’s productive capacity and earnings just as investment in equipment can increase a firm’s output. Treating education as investment does not necessarily mean denying its cultural or civic value. It can simply mean recognizing that acquiring knowledge has costs, benefits and long-term returns (Becker, 1993). (University of Chicago Press)
Defenders also warn that indiscriminate debt forgiveness can generate moral hazard. Borrowers may take greater risks when they expect future relief. Governments may postpone tax reform or continue unsustainable spending if creditors repeatedly cancel obligations. Creditors, anticipating nonpayment, may raise interest rates or refuse to lend to responsible borrowers as well.
This concern is not invented. IMF discussions of sovereign debt have long identified fear of moral hazard as a reason creditors resist relief, while empirical research has examined whether debt cancellation weakens subsequent fiscal effort. Ferry, for example, found evidence that governments increased tax effort before qualifying for multilateral relief but sometimes relaxed that effort afterward (Ferry, 2019; Guitián, 1992). (IMF eLibrary)
The neoliberal defense can therefore be summarized without caricature:
Debt makes useful activity possible before sufficient savings exist. Interest compensates time and risk. Repayment creates trust. Consequences make freedom meaningful. Discipline prevents resources from being consumed without accountability. Personal agency matters because people are not merely passive victims of social forces.
All of that may be true. The problem begins when a partial truth becomes a complete theory of society.
From responsibility to responsibilization
There is a difference between saying that individuals possess agency and saying that social outcomes principally reveal personal merit.
There is also a difference between recognizing contractual obligations and treating every contract as morally conclusive. And there is a difference between charging legitimate interest and declaring the creditor’s claim superior to every other human need.
Neoliberalism crosses these lines when responsibility becomes responsibilization: the transfer of risks and obligations from institutions to individuals, followed by the moral judgment of individuals according to how successfully they carry those burdens.
Research on neoliberal governance describes this as the construction of citizens and consumers as autonomous, calculating and entrepreneurial subjects. Problems once considered social or institutional are reframed as matters requiring financially literate, environmentally responsible, health-conscious and self-managing individuals (Giesler & Veresiu, 2014; Prothero et al., 2026). (OUP Academic)
A pension system is weakened, and the citizen is told to invest more wisely.
Employment becomes insecure, and the worker is told to become resilient.
Housing becomes unaffordable, and the household is instructed to budget.
Education becomes expensive, and the student is advised to calculate his return on investment.
Healthcare costs rise, and the patient is told to make better lifestyle choices.
The institution withdraws, but responsibility does not disappear. It is deposited onto the individual.
This is not freedom from government so much as government through self-discipline. The person becomes his own supervisor, auditor and collection agency.
The contract is not the whole story
The defenders’ strongest word is choice. The borrower chose the loan. The worker chose the job. The student chose the degree. The tenant signed the lease. The household accepted the mortgage. The sovereign government issued the bonds.
But a signed contract tells us that a choice occurred. It does not tell us how free that choice was.
A worker may choose between an inadequate wage and unemployment. A family may choose between expensive borrowing and an untreated medical emergency. A tenant may choose between excessive rent and homelessness. A country may choose between an austerity package and the collapse of its reserves.
These are decisions. They are not necessarily free decisions in the substantive sense.
The market-liberal defense often focuses on the instant of consent while treating the circumstances that produced consent as external to the moral calculation. The lender possessed capital, alternatives and time. The borrower possessed a deadline.
Both signed. Therefore, they were supposedly equal.
The older condemnation of usury asked whether it was just to profit from another person’s necessity. Modern financial morality asks primarily whether the borrower technically agreed.
The contract becomes a laundering machine for power.
This does not mean contracts should be ignored whenever one party later regrets them. It means consent cannot by itself settle questions of justice, especially when essential goods are involved. Formal choice is real, but it exists within structures of ownership, scarcity and bargaining power.
The creditor is also a moral agent
The moralization of debt is usually asymmetric.
The debtor is examined for irresponsibility. Did he borrow too much? Did he consume instead of invest? Did he understand the terms? Did he save sufficiently? Did he fail to anticipate unemployment, illness or recession?
The creditor is more often described technically. The loan was priced. Risk was modeled. Exposure was securitized. Losses were provisioned.
But irresponsible lending exists as surely as irresponsible borrowing.
A lender may extend credit knowing the borrower is vulnerable. A bank may assume that collateral can be seized. Financial institutions may rely on government rescue when widespread defaults threaten the larger system. Investors may receive high yields precisely because an asset is risky and then demand public intervention when the risk materializes.
If responsibility is inseparable from freedom, it must apply to the creditor as well as the debtor.
The lender who freely pursued a high return accepted the possibility of loss. Yet neoliberal political practice has frequently treated private financial losses as systemic emergencies while treating household or sovereign losses as occasions for discipline.
The risk travels upward during profit and downward during crisis.
This asymmetry is why the language of moral hazard can sound selective. Debt relief for households is condemned because it may encourage future borrowing. Rescue for financial institutions is justified because their collapse could harm everyone.
The systemic argument may sometimes be correct. A disorderly bank failure can cause widespread damage. But the moral lesson is unmistakable: the powerful are interconnected, while the weak are irresponsible.
Interest: price or power?
The defense of interest is strongest when credit finances productive activity, rates reflect genuine costs and the parties possess reasonable alternatives.
It becomes weaker when credit replaces wages, public services or social insurance.
A household borrowing to purchase productive equipment is not in the same position as a household borrowing for food before payday. A government financing industrial infrastructure is not identical to one borrowing repeatedly to service previous loans. A student financing education in a labor market capable of rewarding that education is not identical to one buying credentials because every employer has shifted training costs onto applicants.
Interest may be the price of time, but it is also a claim on future income.
The borrower does not merely return past money. He transfers part of future wages, profits or tax revenue to the creditor. When borrowing is widespread, finance acquires a standing claim over production that has not yet occurred.
This is why the old word usury should not be discarded merely because modern economics has legitimate explanations for interest. Usury can still describe the point at which compensation for risk becomes exploitation of dependency.
The boundary cannot be found through contract alone.
From human capital to the human corporation
Becker’s theory of human capital was analytically useful. Education and training do affect productivity and earnings. The problem arises when the metaphor escapes the textbook and becomes an anthropology.
The person is told that he is capital. He must invest in himself, enhance his market value and produce an acceptable return. Every year outside paid employment becomes depreciation. Every skill without a commercial use becomes suspect. Education is judged by salary. Health is judged by productivity. Social relationships become networks. Leisure becomes recovery time for future work. The worker is transformed into a miniature corporation, except that he cannot declare limited liability against his own life. When his investment fails, he cannot write it off as a bad portfolio decision made under uncertainty. The failure attaches to his identity.
The language of human capital therefore encourages what may be called effortism: the belief that economic outcomes mainly reveal the quantity or quality of personal effort.
Those who succeed are assumed to have worked harder, chosen better and delayed gratification. Those who fail are presumed to have lacked discipline, motivation or foresight.
But effort and reward are not identical. Many of the most exhausting forms of socially necessary work are poorly paid. Ownership income, rent, inheritance and asset appreciation can generate far greater rewards than direct labor. Piketty’s historical research demonstrates the persistent role of accumulated and inherited capital in structuring inequality, challenging any easy identification of wealth with personal exertion (Piketty, 2014). (JSTOR)
The effortist formula is circular: The successful must have worked hard because they succeeded. While the unsuccessful could not have worked hard enough because they failed.
Privilege disappears into biography. Family wealth becomes good upbringing. Connections become networking. Publicly funded education becomes individual investment. Favorable timing becomes vision. Luck becomes courage.
The winner remembers every sacrifice and forgets every subsidy.
Motivationism: politics turned into coaching
Effortism’s emotional partner is motivationism. Motivationism translates social problems into deficiencies of attitude. Poverty becomes a lack of financial discipline. Unemployment becomes insufficient employability. Low wages become a skills problem. Economic stagnation becomes an entrepreneurial deficit. Exhaustion becomes weak resilience.
The preferred remedy is therefore psychological: Work harder. Improve your mindset. Leave your comfort zone. Build your brand. Learn new skills. Stop blaming others.
There is nothing wrong with motivation as personal advice. Initiative can improve an individual life.
It becomes ideology when motivation is offered as a substitute for political economy.
Confidence cannot create jobs that do not exist. Financial literacy cannot compensate indefinitely for wages below the cost of living. Resilience cannot construct public transportation. Networking cannot substitute for industrial policy. A morning routine cannot break a monopoly.
The structural problem is not denied outright. It is simply moved outside the frame until only the individual remains visible.
The evidence against pure choice
The empirical case against effortism does not require denying individual agency. It requires observing that economic mobility varies dramatically according to place and social environment.
Chetty, Hendren, Kline, and Saez examined administrative records covering more than 40 million children and their parents. They found substantial geographical differences in upward mobility. Areas with higher mobility tended to have less segregation, less inequality, stronger primary schools, greater social capital and greater family stability (Chetty et al., 2014). (OUP Academic)
This does not prove that choices do not matter. It proves that the consequences and effectiveness of choices depend on circumstances.
The same degree of effort can yield different results in communities with different schools, labor markets, transport systems, social networks and levels of violence. The person is active, but he is not acting on an empty stage.
A serious theory of responsibility must therefore hold two ideas simultaneously: People make choices. But People do not choose the full conditions under which their choices acquire consequences.
Neoliberal moralism normally preserves the first proposition and forgets the second.
Success on probation
The system does not merely blame those who fail. It teaches successful people to experience success as temporary.
The employee met the target—but must exceed it next year.
The graduate obtained a degree—but must acquire another credential.
The business became profitable—but must scale.
The household purchased a home—but must protect its value.
The worker has a job—but must remain employable.
The saver accumulated money—but not enough for every imaginable emergency.
Success does not provide arrival. It creates a maintenance obligation. This is not accidental. Security weakens discipline. A worker with savings, public services and reliable employment protection can refuse degrading conditions. A worker who fears falling must remain flexible, available and grateful.
Insecurity is therefore renamed motivation. Competition prevents laziness. Precarity encourages adaptability. Fear of unemployment rewards performance. Anxiety about retirement encourages saving. Dissatisfaction promotes growth.
The successful person becomes a debtor to his own future. Yesterday’s achievement is the principal. Tomorrow demands interest.
Social whataboutism
The everyday enforcement mechanism is social whataboutism.
A person complains about his wage and is told that others are unemployed. A contractual worker asks for security and is told that somebody else would be grateful for temporary work. An exhausted employee is compared with somebody working two jobs. A struggling household is compared with another that survives on less.
This is the downward comparison: Others have it worse, so you have no right to complain.
Then comes the upward comparison: Others began with less and achieved more, so your failure is your fault.
Suffering is minimized by looking downward. Achievement is minimized by looking upward.
The individual is instructed to feel grateful because someone possesses less and ashamed because someone has achieved more.
The exceptional success story becomes a weapon. One person escapes poverty, and the exception is presented as proof that poverty is voluntary. One entrepreneur survives adversity, and thousands of failures disappear from view.
But proof of possibility is not proof of equal opportunity. A man may swim across a dangerous river. That does not prove the bridge is unnecessary.
Social whataboutism also prevents solidarity. Public employees are turned against private employees. Regular workers are turned against contractual workers. Contractual workers are turned against the unemployed. Citizens debate who deserves less instead of asking why security has become scarce.
Deprivation becomes a competition in gratitude.
Austerity as national character-building
The moralization of debt scales from households to countries.
A debtor state is told to restore credibility through spending restraint, wage control, subsidy reduction, privatization, liberalization and tax reform. Such policies may sometimes be necessary. Governments cannot indefinitely spend foreign exchange they do not possess or borrow without regard to repayment capacity.
But the language of adjustment is rarely neutral. It speaks of discipline, maturity, confidence and responsibility. The nation is treated like a disorderly household whose suffering is expected to improve its character.
Even economists writing in an IMF publication have acknowledged that parts of the neoliberal policy agenda—particularly capital-account liberalization and fiscal austerity—can increase inequality, impose significant welfare costs and potentially undermine the growth they are supposed to restore (Ostry et al., 2016). (IMF)
The central questions are political: Who incurred the debt? Who benefited from the expenditure? Who received the interest? What productive capacity was created? Whose income, employment and public services must be sacrificed?
The phrase national responsibility does not answer these questions. It often obscures them.
Debt service is treated as binding, while food, healthcare, education and industrial development become adjustable.
The creditor’s contract is fixed. The citizen’s life is flexible.
Where the defenders remain right
A critique of neoliberal moralism should not become an apology for irresponsibility.
Promises matter. Fraud matters. Waste matters. Corruption matters. Borrowers can act recklessly. Governments can conceal liabilities, misuse loans and leave future generations with the bill. Debt relief can be poorly designed. Interest can compensate legitimate costs. Skills and effort can improve lives.
Nor should every inequality be treated as proof of oppression. People possess different preferences, accept different risks and make different decisions. A society that refuses to acknowledge agency can become paternalistic, bureaucratic and suffocating.
Hayek was right that freedom without any responsibility is incoherent. Friedman was right that citizens should not be reduced to wards of the state. Mises was right that time and risk have economic value. Becker was right that education and training can be investments. But their arguments become ideological when responsibility is demanded only from those below, while institutions above are treated as forces of nature.
The answer is not to abolish responsibility. It is to make responsibility reciprocal.
Responsibility to whom?
A democratic political economy would retain personal responsibility while widening its field.
Borrowers would be responsible for honest repayment, but lenders would be responsible for affordability, disclosure and reckless extension of credit. Workers would be responsible for competence, but employers would be responsible for adequate training, safe conditions and decent compensation. Citizens would be responsible for contributing to society, but society would be responsible for supplying the foundations that make contribution possible. Governments would be responsible for fiscal prudence, but creditors would share losses when they knowingly purchased risk.
Success would be respected without being confused with superior virtue. Failure would be examined without automatically becoming a judgment on character. Choice would matter, but the available choices would also be judged.
This is the difference between neoliberal responsibility and social responsibility: Neoliberal responsibility asks whether the individual adapted to the system. Social responsibility also asks whether the system fulfilled its obligations to the individual.
The first installs a creditor inside every mind. The second restores reciprocity between persons, institutions and communities.
The harshest achievement of neoliberal capitalism is not simply that it produces inequality. It is that it can make even successful people feel like failures-in-waiting. It moves the finish line, converts security into complacency and treats rest as an unpaid debt to the future.
The final command is no longer merely: "Pay what you owe." Instead it is: "Live as though your right to dignity, security and rest must be earned again every morning."
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References
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