Debt relief as a window onto the American state

For the Balkinization Symposium on Emily Zackin and Chloe Thurston, The Political Development of American Debt Relief (University of Chicago Press, 2024).

Devin Caughey

The Political Development of American Debt Relief (PDADR) is a concise yet panoramic account of the political economy of debt relief over the course of American history. From Daniel Shays to Occupy Wall Street, it documents the mutable and sometimes surprising politics of debt as it has evolved since the founding. Along the way, PDADR provides an illuminating perspective on the development of the American state and its relationship to the American political economy.

Anyone familiar with the prior work of its authors will not be surprised at many of PDADR’s themes. In previous work, each author has helped illuminate the complex and distinctive character of the American state and the politics it engenders. In her work on state constitutions, Emily Zackin has shown that rather than being a repository of Lockean liberal principles enforced by politically insulated judges, the malleable constitutions of U.S. states have long been used by popular movements as vehicles for asserting positive rights and enacting specific legislation that constrains judicial discretion.[1] Chloe Thurston’s research on the politics of home ownership shows that while the U.S. public–private welfare state, with its emphasis on indirect mechanisms such as subsidized credit, “submerges” the state for beneficiaries of government largess, it can also politicize ostensibly market transactions in the eyes excluded groups.[2] Synthesizing the respective perspectives of its authors, PDADR highlights similar dynamics in the context of debt relief.

The book is organized around two major questions:

1.     In the 19th century, how were farmers repeatedly able to surmount the barriers imposed by America’s liberal tradition and induce the government intervene to relieve their debts?

2.     In the 20th century, why did wage workers fail to replicate the success of their agrarian predecessors in organizing politically in pursuit of debt relief?

DPADR’s answer to the first question stresses several factors. One is the cultural power of alternatives to the liberal tradition, most notably the civic republicanism emphasized by Gordon Wood and others.[3] Agrarian debt relief resonated strongly with several strands of the republican tradition: the virtue of the yeoman farmer, the necessity of an economically independent citizenry, the state’s capacious powers to provide for the people’s welfare.[4] Republican ideology both valorized farmers as particularly deserving citizens and considered their “enslavement” with debt a grievous threat to the republic. As Zackin and Thurston note, the republican vision of the virtuous debt-ridden farmer was interwoven with ideas of ascriptive hierarchy that identified this farmer as White, male, and prosperous enough to already own land.[5]

In addition to the cultural influence of republicanism, DPADR’s answer to the first question also emphasizes the character of the 19th-century American economy and its interaction with political institutions. The periodic deflationary downturns of the 19th century struck indebted farmers collectively, undermining attributions of their insolvency to personal failings. Agrarian debt crises were concentrated spatially as well as temporally, facilitating political organization and mobilization. The cause of agrarian debt relief was also advantaged by the sectional division of labor between the indebted agrarian “periphery” and capital-rich industrial “core,” depriving state governments in the former of constituency pressure from creditor interests.[6]

State governments responded to pressure from agrarian social movements by repeatedly intervening to shield indebted farmers from their creditors. While this brought them into conflict with judges wielding constitutional provisions such as the federal Contract Clause, states repeatedly challenged these Lockean constraints and granted their indebted citizens at least temporary relief.

Echoing arguments by Theda Skocpol on Civil War pensions, DPADR argues that the various forms of debt relief offered by 19th-century state legislatures constituted a sort of proto-welfare state. This is a provocative claim, for unlike pensions, debt relief does not require the disbursement of benefits directly to citizens. Rather, like the “forbearance” in contemporary Latin America documented by Alisha Holland, it primarily involved the suspension or modification of normal legal procedures for enforcing the payment of debts. 19th-century debt relief was also temporally discretionary and time-limited rather than determined by legally guaranteed social rights. If 19th-century debt relief was a form of welfare state, it was qualitatively distinct from the social-democratic ideal type, in ways that prefigured the submerged state examined by Thurston’s first book.

DPADR’s answer to the second question, why 20th-century wage workers failed to replicate the success of their agrarian predecessors, also involves multiple factors. In part, the explanation lies in wage workers diminished rhetorical access to republicanism relative to farmers. Notwithstanding the development of “labor republicanism” in the early Republic, by the New Deal the typical wage worker was a far cry from the yeoman farmer of republican legend or even the independent artisan of the early 19th century.[7] Wage workers, dependent on their employers, by definition failed republican standards of citizenship, obviating need to save them from debt for the sake of the republic. Moreover, the kind of debt characteristic of wage workers—debt to fund consumption rather than production—was perceived less sympathetically.

Twentieth-century consumer debtors also lacked farmers’ advantages of temporal and geographic concentration. The Keynesian taming of the business cycle rendered consumer debt more chronic than periodic, depriving wage workers of ready external explanations for their insolvency. Unlike farmers, wage workers were not concentrated in states lacking major creditor interests. Finally, the organized representatives of the working class—labor unions as well as civil rights organizations—showed little interest in pro-debtor policies. Rather, as Thurston showed in her first book, they were primarily interested in expanding their constituents’ access to credit and feared that debt relief would undermine this priority.

Given these reinforcing factors, the lack of mobilization around consumer debt seems overdetermined. It is thus all the more surprising that federal bankruptcy law liberalized dramatically over the 20th century, even as pro-debtor popular mobilization and state-level policymaking withered. Originally a coercive mechanism forced on unwilling debtors, bankruptcy evolved over the 19th and 20th centuries into a voluntary and quasi-protective institution. This trend culminated in 1978 revision of the bankruptcy code, “the most debtor-friendly in the world.”[8]

Remarkably, 1978 legislation was passed with almost no organized input from debtors themselves. Creditor interests were largely absent as well. Instead, DPADR intriguingly argues, the dominant force behind the bill was the cadre of bankruptcy lawyers and other experts who had been fostered by and sought to defend the pro-debtor national bankruptcy regime that had emerged over the 20th century. As DPADR notes, professionals have played a similar role in other policy areas, such as mental illness[9] or employment discrimination.[10] Whether the surrogate advocacy of bankruptcy professionals effectively represented the interests of debtors is unclear. What does seem clear, however, is that federal bankruptcy policy followed a very different developmental trajectory over the 20th century than did subnational policy, one only loosely coupled to societal mobilization around debt.

Even as legal professionals came to dominate debt relief policy, the Supreme Court largely ceded the field. Abandoning constitutional objections to debt relief rooted in the Contract Clause, the Court eventually acquiesced to and legitimated states’ longstanding practice of passing debt relief during economic emergencies. This can be read as a victory for “popular constitutionalism” against the judicial supremacy. DPADR also describe it as a manifestation of the rise of what Karen Orren and Stephen Skowronek have termed the “policy state”: a mode of governance emphasizing discretionary choice among policy options rather than constitutional rights and structures.[11] As indicated by the fate of President Biden’s student debt policies, debt relief can still trigger constitutional objections, but these tend to be couched as statutory interpretations rather then defenses of constitutional rights.[12]

Though couched in different terms than earlier episodes, the legal controversy over student debt nevertheless points to a resurgence in the political salience of debt relief. Beginning in the 2008–09 financial crisis and accelerating during the COVID pandemic, debtors have organized and mobilized on a scale not seen in a century. As in the past, recent advocates for debt relief have been aided (politically) by being collectively victimized by temporally concentrated circumstances beyond any individual’s control (the housing crisis, the pandemic). Also, like responses to agrarian debt, much of the policy response to mortgage debt was conducted by state governments, though with much variation across states.[13] I would also speculate that, more so than wage workers, the youngish bearers of student debt have developed a collective identity as an unfairly disadvantaged group. As with 19th-century farmers and their urban creditors, this identity is rooted partly in contrasts with less deserving others—in this case, earlier generations who paid little for college and came of age in more favorable circumstances.

As I hope this post has indicated, DPADR’s account of American debt relief connects with a myriad of topics and themes ranging across the entirety of American history. That it does so in such efficient and readable fashion is all the more impressive. Given the book’s combination of scope and brevity, it is no slight to it to say that it also left me with a number of outstanding questions:

•        What is the net effect of (different forms of) debt relief on those seeking credit? DPADR opts to sidestep this question, which is reasonable since its authors are political scientists rather than economists. Nevertheless, it was a question I kept returning to and wondering about. More to the point, it is a question that representatives of indebted constituencies debated and disagreed on. Why did agrarian organizations seek so debt relief so avidly while civil rights organizations placed much more weight on access to credit?

•        Debtors are the main protagonists of DPADR. What about the other side of the coin: creditors? Creditor interests appear at various points—at the Constitutional Convention, in the push for the 1898 Bankruptcy Act, in the counter-mobilization to the 1978 revisions—but their part in this account is not as sustained or as theoretically developed.

•        How did policymaking at the state and federal levels relate to one another? As I note above, at many ponts in time the two levels appear to be following quite separate developmental trajectories—pro- vs. anti-debtor in the 19th century, quiescent vs. activist in the mid- to late-20th. But perhaps the relationship was more intertwined. It is possible, for example, that states’ unpredictable pro-debtor activism persuaded creditors to prefer the nationalization of bankruptcy policy, even if it meant debtor-friendly concessions?

•        How exactly did bankruptcy experts become so powerful in the mid-20th century, and what were the policy implications? Accounts of similar phenomena, such as Sean Farhang’s on the fair employment bar, provide a theoretically compelling arguments for why policy choices at one point in time (in Farhang’s case, the 1964 decision to lodge fair employment enforcement in the courts rather than administrative agencies) unexpectedly created new constituencies to defend and extend the policy regime. A similar story seems likely in the case of bankruptcy policy but DPADR leaves me wondering about the details. I am also curious about the normative implications of policymaking-by-experts. The 1978 bankruptcy code may have been pro-debtor, but it looks very different from the debt relief policies demanded by organized debtors themselves in the 19th century. What does this suggest about the degree to which the policies preferred by bankruptcy experts served their own professional interests rather than or in addition to the interests of debtors?

•        Finally, while DPADR emphasizes how ascriptive hierarchies along racial and other lines helped define those “deserving” of debt relief, it is curiously silent about another form of prejudice: anti-Semitism. Historians since Hofstadter have argued (though not without compelling counterargument) that agrarian denunciations of “the money power” were rooted in, or at least amplified by, prejudice against urban Jewish “money lenders” (see the reference to “Shylocks” on p. 96 of DPADR).[14] Were such anti-Semitic appeals an important part of agrarian debt relief politics, or are Hofstadter’s critics correct in arguing that his claims were wildly overblown? Even if we side with Hofstadter’s critics, as I am inclined to do, the existence of such appeals reveals how easily ascriptive hierarchy can blend with rhetorical appeals rooted in other traditions such as republicanism.

Author information

Devin Caughey is the Class of 1949 Professor of Political Science at the Massachusetts Institute of Technology. He can be reached at caughey@mit.edu.

References

Bensel, Richard. 1984. Sectionalism and American Political Development: 1880–1980. Madison: University of Wisconsin Press.

Farhang, Sean. 2010. The Litigation State: Public Regulation and Private Lawsuits in the United States. Princeton, NJ: Princeton University Press.

Hofstadter, Richard. 1955. The Age of Reform: From Bryan to F.D.R. New York: Vintage Books.

Jo, Angie. 2025. “The Liberal Safety Net: State Interventions in Times of Collective Crisis.” PhD thesis, Massachusetts Institute of Technology.

Kazin, Michael. 1998. The Populist Persuasion: An American History. Revised edition. Ithaca, NY: Cornell University Press.

Mettler, Suzanne. 2011. The Submerged State. Chicago: University of Chicago Press.

Morgan, Edmund S. 1972. “Slavery and Freedom: The American Paradox.” Journal of American History 59 (1): 5–29.

Novak, William J. 1996. The People’s Welfare: Law and Regulation in Nineteenth-Century America. Chapel Hill: University of North Carolina Press.

Orren, Karen, and Stephen Skowronek. 2017. The Policy State: An American Predicament. Cambridge, MA: Harvard University Press.

Perera, Isabel M. 2018. “States of Mind: A Comparative and Historical Study of the Political Economy of Public Health.” PhD thesis, University of Pennsylvania.

Rodgers, Daniel T. 1992. “Republicanism: The Career of a Concept.” Journal of American History 79 (1): 11–38.

Smith, Rogers M. 1997. Civic Ideals: Conflicting Visions of Citizenship in U.S. History. New Haven, CT: Yale University Press.

Thurston, Chloe N. 2018. At the Boundaries of Homeownership: Credit, Discrimination, and the American State. Cambridge University Press.

Versteeg, Mila, and Emily Zackin. 2016. “Constitutions Unentrenched: Toward an Alternative Theory of Constitutional Design.” American Political Science Review 110 (4): 1–18.

Wood, Gordon S. (1969) 1998. The Creation of the American Republic, 1776–1787. Chapel Hill: University of North Carolina Press.

Zackin, Emily. 2013. Looking for Rights in All the Wrong Places: Why State Constitutions Contain America’s Positive Rights. Princeton University Press.

Zackin, Emily, and Chloe N. Thurston. 2024. The Political Development of American Debt Relief. Chicago: University of Chicago Press.