Debt bondage

Debt bondage or bonded labor is a means of paying off a family's loans via the labour of family members or heirs. It is either a kind of indenture or truck system, and is therefore also a form of unfree labour. Historically, in the USA, it is also sometimes called peonage. (Note, however, that the word peon has broader implications and usage in Latin America.) Where children have to work due to debt bondage, this is considered a worst form of child labour.


Historical background to bonded labor

Prior to the early modern age, feudal and serfdom systems were the predominant political and economic systems in Europe. These systems were based on the holding of all land in fief or fee, and the resulting relation of lord to vassal, and was characterized by homage, legal and military service of tenants, and forfeiture. Many historians have argued that this system was also established in some Latin American countries, following European settlement.

A modernization of the feudal system was "peonage", where debtors were bound in servitude to their creditors until their debts were paid. Although peons — from a technical point of view — are only obligated to a creditor monetarily, from a practical perspective, the resultant relationship of a peon to the creditor is destructive of basic personal autonomy within the society.

Historical peonage

Peonage means an unfree labour system where laborers are bound in servitude until their debts are paid in full. Those bound by such a system are known, in the US, as peons.

Employers typically force laborers to buy from employer-owned stores at inflated prices in order to keep them in debt. This is also a variation on the truck system (or company store system), in which workers are exploited by being paid only in minimal amounts of goods and/or services.

Such systems have existed in many places at many times throughout history.

Historical examples

  • The American South - Such a system was often used in the southern United States after the American Civil War where African-American and poor white farmers, known as sharecroppers, were often forced to purchase seed and supplies from the owner of the land they farmed and pay the owner in a share of the crop.
  • In Peru a peonage system existed from the 1500s until land reform in the 1950s. One estate in Peru that existed from the late 1500s until the end of peonage had up to 1,700 peons employed and boasted its own jail. Peons were expected to work a minimum of three days a week for their landlord and more if necessary to complete assigned work. Workers were paid a symbolic 2 cents per year. Workers were unable to travel outside of their assigned lands without permission and were not allowed to organize any independent community activity.

Modern views

According to Anti-Slavery International, "A person enters debt bondage when their labour is demanded as a means of repayment of a loan, or of money given in advance. Usually, people are tricked or trapped into working for no pay or very little pay (in return for such a loan), in conditions which violate their human rights. Invariably, the value of the work done by a bonded labourer is greater that the original sum of money borrowed or advanced."

At international law

Debt bondage has been defined by the United Nations as a form of "modern day slavery" [1] ( and is prohibited by international law. It persists nonetheless especially in developing nations, which have few mechanisms for credit security or bankruptcy, and where fewer people hold formal title to land or possessions. According to some economists, for example Hernando de Soto, this is a major barrier to development in those countries - entrepreneurs do not dare take risks and cannot get credit because they hold no collateral and may burden families for generations to come.

Where children are forced to work because of debt bondage of the family, this is considered not only child labour, but a worst form of child labour in terms of the Worst Forms of Child Labour Convention of the International Labour Organization.

Despite the UN prohibition, Anti-Slavery International estimates that "between 10 and 20 million people are being subjected to debt bondage today."

Modern example: prostitution

News media in western Europe regularly carry reports about one particular kind of debt bondage: women from Eastern Europe who are forced to work in prostitution as a way to pay off the "debt" they acquired when they were illegally brought over the border.

Marxist analysis

According to Marxist economists, debt bondage is characteristic of feudal economies, where families are considered the responsible unit for financial relationships, and where heirs continue to owe parents' debts upon their deaths. Fully capitalist economies are characterized by the individual taking all responsibility, and such mechanisms as bankruptcy and death taxes reducing creditors' rights (while increasing the power of the state). Heirs are freed from the creditor, but at the cost of a drastically increased power accruing to the state itself.

Debt bondage is a form of disguised slavery in which the subject is not legally owned, but is instead bound by a contract to perform labor to work off a debt, under terms that make it impossible to completely retire the debt and thereby escape from the contract.

See also

Wage slavery, Working class, Capitalism, Karl Marx, Worst Forms of Child Labour Convention

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