Christian Poppe SIFO
Jan 01, 2016
The Problem
Market:Market: But:But:
Debt problems originate in the market context
The moral imperative:
Bills must be paid on time
The debtor faces certain demands: Notify the creditors about the
problems Be accessible Give all necessary information Be ready to negotiate Change the life style Keep renegotiated obligations
Defaulters do not always do as expected
Make stupid decisions Do not change lifestyles Do not make extra efforts to pay Make themselves inaccesible Keep the money themselves Are unreliable: do not keep
deals
Expanation: immoral attitudes They try to get money they are
not entitled to They try to hide away money They spend other peoples’
money
They do not want to payThey do not want to pay
Institutional Conditions
Civic society: Family• Friends/ network• Non-profit organisations
Social orientation: Closeness & solidarity Integration: in- and out-
gruups Protect the primary group
from outside threats Everyday dialogues
The life world Can e jeopardised by the
market
System World:
•Market + state
•.. shall ehance te life world
•.. But particularly the market has a bad reputation
Financial Skills as social knowledge
We learn financial skillsWe learn financial skills Standard packagesStandard packages
Born into a family Learn fin. norms and values Learn acceptable fin. careers Learn that conform actions yield
social belonging Lern the difference between
oneself and others This knowledge provides the
basis for routines .. And creativity
Lists of goods, service and necessary investments
Standard budget: a national package , common multiple
Variation: sub-cultural packages varying by .. resources (social class, status) .. age .. era
Group level
Standard Package Orientation
Store of knowledge Everday finance
How to transform financial resources into social prestige Whole packages
Legitimate means Normative constraints Actual market knowledge
Symbolic skills: demonstration of social belonging
Justifying everyday routines
Consumption is institutinalised Mdemonstrate similarities and
dissimilarities Dougnut focus Identity through consumption
Packages with different price tags Packages that stress different social
arenas Packages with differnt needs for
credit
Packages as social constraints
The normal situation The problem situation A conservative social constraint:
Normatively: belonging is something that is achieved
Life styles must be maintained (the home)
Life styles must be adjusted (age, technology)
Packages channel resources in certain directions
Packages tie up resources
Gdebt problems imply that one can no longer afford the package
To leave the package means: .. to take on a different, cheaper and
unwanted package .. to give up habits and routines .. to give up coveted actvities .. to lose achived scial belonging .. being unsafe: we all fear the
unknown
Coping with debt Problems
We live in the Life World:
Demands and constraints not only from the system world, but also from the life world
Protect the living conditions of the primary group
Aversion against de-classation: Mone does not give up one’s investments or consumption habits
Implication:
The socially sensible is often irrational from a financial point of view
Informant Characteristics
20 defaulters
25 – 65 yrs
More than 5 years in financial trouble
Have already applied for, or should apply for, a debt settlement
Half of them are from the middle class
Half of them are from the labour class
Between NOK 500.000 and15 mill of debts
Stages Stage 1:
Retrospectively: one should have acted differently Tsunami effect stage 2: “The real estate agent who sold me the house told me when he
quit his job in the agency: “You know, I really have to tell you that you’re about to lose everything.” I didn’t understand what he meant, not even my husband saw it coming. Nobody did until I lost the trial.” [1]
Stage 2: Kaos, avmakt, forsvar av etablerte livsstiler Sannhetens øyeblikk fase 3: “My father and aunt had both guaranteed for my business
debts, as I had done myself with my private property. When I was made bankrupt my father had to sell the house and move to a retirement home. It was tragic. He didn’t speak to me for years. My aunt had to sell her house and move to a retirement home, too. My own house went on a forced sale. Everything was lost. My marriage broke, and my wife and child moved to another town.” [32]
Stage 3: Consolidating the identity as a defaulter
“Fourteen days ago I got one of those letters: pay within two weeks or else.. Well, I’ve heard it before. I can’t let it upset me. If I did, I would not be here talking to you. I’d been six feet under, you know”
Stage 1 Financially rational action
Ethos: Do not do anything hasty Business as usual Øke Increase the income: extra jobs Reducing the expenditures : invisible items
Sosial orientation: The ostrich approach“My wife comes from a poor country. I always took a pleasure in buying her things
like expensive clothes. .. Her family is poor, so over the years we have tried to help them out economically .. When our economy got strained we behaved as if we had enough money. There was less shopping and a little less support to my wife’s family. But I knew we spent too much .. Our friends were surprised when I went bankrupt.” [45]
“Well, I just hoped I would eventually come across something smart to do and get away with it .. I thought some of my debt eventually would be out-dated and eradicated.” [28]
Stage 2 Financially rational action
Increasing the income: new job, more job, education Reducing debts: sell the home, the car, savings Big reduction in consumption Hjelp from family and friends: limited
Sosial orientation: The Ostrich revisited:
“I rented a very nice flat in the same area that was equally exclusive .. It was convenient since my daughter’s school was nearby. But it was expensive .. My daughter could have a student’s loan. We spent that” [1]
Avoid stigma Move to another city (Oslo) Psychologically extreme: run away (change of addresses, France, India) Avoid social securuty, court rooms, not read mail Hide as much of it from the employers
Stage 3 Financially rational action:
No longer any point in trying to serve the creditors
Strategic market behaviour: Not accept increases in one’s salary, not take on additional jobs or change to better paid jobs Still: A change of jobs may be convenient No longer my problem
Sosial orientation:
Single out the most important bills
“When I find bills in my mailbox I couldn’t care less, you know. I sort out the important bills and pay them with a smile. As for the rest of them, I must confess, I recognise the envelopes and leave them unopened. I throw them in the dustbin.
Take care of oneself
“Yes, I do allow myself to have dinner at a restaurant and spend some money in that way. It’s something to look forward to, you know. Each month when I get my salary I do it.” [1]
Take care of the children
“There are children around, and that’s where the problems start as far as I’m concerned. That’s the only thing I really care about. I’ve tried my best to prioritise the use of money to minimise the effects my debt problems have on the family.” [80]
Making the illegitimate legitimate• Problem:
The repayment norm is valid in the life world, too
First: make a division between formal debts and debts of honour Formal debts: the system world Debts of honour: The life world – close relations:
“I don’t pity banks .. Had I borrowed from a common acquaintance without paying back, my friends would tell me right away what a bad person I am .. Debts of honour directly characterise you as a person. This you-and-me moral is much stronger than when dealing with banks. If I had treated my friends as I treat my creditors I would get loads of reactions — well deserved ones, too, as I see it.” [99]
Formal debts: Story TellingNext: introducing a new moral principle:
Pay what you can whenever you can
Mistrust
The stories are not accepted automatically Comes on top of the financial and social losses in stage 3
All coping is marked by dissatisfaction and disappointment
Negative experiences with individual creditors are generalised to institutions and the system world as a whole
Especially among those who tell productive stories
Mistrust in Creditors Business-wise:Business-wise: “And the bank had all the information they needed, they checked and
double-checked. They knew the risks involved. So why can’t they take on some responsibility? Why only me?” [23]
Be considerate:Be considerate:“The bank forced us to sell the house when the price level was at its lowest. If they
had allowed us to keep the house, today’s value would surely have exceeded my debts and everyone would have been happy. Instead, they swept us under the carpet and ruined the whole family.” [32]
The right to live:The right to live: “Hey, when are you going to pay? Look how much you owe us, take a look at
this paper! They refused to listen to me. That I had a right to live was no concern of theirs. That’s the feeling they gave me. It’s very bad.” [8]
Mistrust in the System
The welfare system:The welfare system:“I felt like being trampled on .. They were parsimonious. I didn’t get what I felt I
should have, and I knew others who got more than enough. I felt unfairly treated.” [5]
Politicians:Politicians:“So who is to blame? It’s politics, the deregulation and release of credit .. The labour
party Minister of Finance who weeded out the problems created by the former Right Wing Government in such a way that the banks went bankrupt and the government took over all the shares. And now they got billions up their asses, right? And the properties [we lost] are now owned by the banks.” [1]
The whole ”system”:The whole ”system”: “And I’ve been to meetings and meetings and meetings, and there’s been loads of
waffle, and in the end I simply lost confidence in the whole system because I find myself without legal rights.” [32]
Social Responsibility
Avoid stage 3 ..
Mistrust Integration is threatened Defaulters, creditors,
society: everybody loses
Existing solutionsStage 3 Stage 2
Money collection
Legal protection Social programs Financial counselling
GjeldsVoluntary debt negotiations: ca 10.000 cases in 2006, including ca 2.000 that found no solution and were transferred to the court
The Debt Settlement Act
Money collection Market solutions
Private debt counselling Refinancing Bank2
Legal protection Social programs Financial counselling
Ca 18.000 cases i 2006