Istanbul Journal of Economics
Household Indebtedness in the Context of the Financialization of Social PoliciesBaşak Işıl Alpar
Following governments and corporations, financial institutions and banks opened a new path for themselves through household indebtedness during the financialization process, which accelerated with neoliberalism and globalization and expanded the scope of inclusiveness. Regarding this mentality, this situation is related to the desire for control that emerged during the transition from natural philosophy to the scientific revolution. It is also related to developing an economic mentality that does not overlap with society and humanity by embracing capitalism’s theoretical foundations. In this context, quantitative and qualitative financialization strategies have emerged to cover people from almost every income group. Some of the people who are targeted by financialization through household indebtedness are also the people for whom these social policies exist. Therefore, this study aims to examine the transformative effect of the financial structure that provides income through household indebtedness on social policies and lending strategies developed for households. Result of the literature review reveals that welfare states and social inclusion are replaced by debtfare states and financial inclusion, respectively. Moreover, this situation is interpreted as the financialization of social policies. Financialization and lending strategies developed as part of financial restructuring strengthen market power while weakening the social state. Furthermore, households facing deficiencies in social state welfare provision and seeking individual loans to meet their basic needs constitute an indebted society.
Sosyal Politikaların Finansallaşması Bağlamında Hanehalkı BorçluluğuBaşak Işıl Alpar
Neoliberalizm ve küreselleşmeyle birlikte hız kazanan ve kapsayıcılık alanını genişleten finansallaşma sürecinde finansal kurumlar ve bankalar, devletler ve şirketlerden sonra hanehalkı borçluluğu üzerinden kendilerine yeni bir kazanç kapısı açmıştır. Bu durum zihniyet yapısı bakımından doğa felsefesinden bilim devrimine geçişte ortaya çıkan kontrol etme isteğinin ve kapitalizmin teorik temellerine bürünerek toplum ve insanlık ile örtüşmeyen bir iktisat anlayışının gelişmesi ile ilgilidir. Bu bağlamda niceliğe ve niteliğe yönelik finansallaşma stratejileri neredeyse her gelir grubundan insanı kapsar hale gelmiştir. Nitekim finansallaşmanın hanehalkı borçluluğu üzerinden hedefine aldığı bazı bireyler, aynı zamanda sosyal politikaların varlık amacı olan bireylerden başkası değildir. Dolayısıyla bu çalışmanın amacı hanehalkı borçluluğu üzerinden kazanç sağlayan finansal yapının sosyal politikalar üzerindeki etkilerini ve hanehalklarına yönelik olarak geliştirilen borçlandırma stratejilerini incelemektir. Literatür taraması neticesinde refah devletlerinin yerini borç refahı devletlerinin, sosyal içermenin yerini finansal içermenin aldığı ve bu durumun sosyal politikaların finansallaşması şeklinde yorumlandığı görülmektedir. Finansallaşma ve finansal yeniden yapılanma kapsamında geliştirilen borçlandırma stratejileri, piyasa iktidarına güç kazandırırken aynı zamanda sosyal devleti güçten düşürmektedir. Ayrıca sosyal devletlerin refah temininde eksiklerle karşılaşan hanehalklarının temel gereksinimlerini finanse etmek için bireysel kredilere başvurması; borçlu bir toplum yapısı meydana getirmektedir.
Individuals, households, states, and businesses are concerned about the phenomenon of debt or indebtedness. Although indebtedness is not a new notion, it needs to be reinterpreted from time to time. Governments use loans to invest or implement policies; companies, to increase earnings or expand production capacity; and individuals, primarily to consume. However, in comparison to other units, household economic power is quite limited. Changes in mentality and system are at work in this situation. The scientific revolution’s shift in mentality from “recognition/definition” to “control” has reproduced its financial equivalent in the form of debt supervision. Moreover, the change in economic mentality, which does not correspond with human reality, loses the meaning of balance and savings, and emphasizes consumption, has also caused the phenomenon of indebtedness to rise alongside neoliberalism, globalization, and financialization processes.
The financial sector has shifted its focus to households and begun a restructuring process based on new lending strategies. These strategies can be classified into quantitative and qualitative. Under the banner of “financial inclusion,” quantitative strategies are designed to cover all possible population groups, from rich to poor. However, we cannot claim that this inclusiveness is achieved for a social reason. The rich and working classes have put forward a value for the financial sector because of the guarantee they provide to the system in loan repayment. Meanwhile, the poor individuals have put forward a value because of the fractional reserve system and debt-based monetary system, which makes it profitable with each new customer. Furthermore, qualitative strategies have been developed to include individuals who are distant from debt for various reasons or certain population segments. Some of these strategies are ethical banking for socially responsible individuals, gender equality for women, and private pensions promising a better life for the elderly. With the restructuring of financial institutions, the traditional forms of borrowing, referred to as “informal” by the financial system, have been replaced by “formal” (bank credits). However, loans imposed a financial burden on individuals and households due to interest payments.
As financialization has increased, some issues in the field of social policies have begun to emerge. Although credit policies strengthened the market power, they also weakened social policies by utilizing economic and non-economic factors (e.g., unpaid household labor and public services), particularly in labor force reproduction. Funds from households and the government began to flow into the private capital sector. Moreover, employee wages and salaries fed the financial system’s earnings due to insufficient income, whereas the inadequacy of pensions due to social security reforms fed the insurance companies through private pension funds. Therefore, the inadequacy of real wages puts financialization pressure on social policies. In other words, the need to feed the deficit created by individual incomes transferred to financial channels via indebtedness causes social policies to become financial system instruments and lose power.
Individuals are forced to borrow when the limited increase in real wages is combined with the inadequacy of public services. Although the social aspect of citizenship has weakened, its financial aspect has emerged. Furthermore, welfare states are now paradoxically known as “debtfare states.” The function of social policies has also been raised in this context. Based on a literature review, this study aims to examine the quantitative and qualitative lending strategies of financial institutions and banks that profit from household indebtedness, and their transformative effect on social policies.
It has been demonstrated that capitalists will not close the ledger as long as the financial system is fed by household debt. Financialization will continue to set the agenda for the functions of social policies that have been taken over. Moreover, we can argue that preventing the debt cycle through debt restructuring should be one of the primary goals of social welfare states. Furthermore, additional social and economic safeguards should be put in place to prevent predatory financial inclusion based on age, gender, and other disadvantages. In summary, the principle of “first do no harm” (primum non nocere) in medical sciences should also be applied to the social sciences.