In January 2026, UN Secretary-General António Guterres told the BBC that some now believe “the power of law should be replaced by the law of power.” He was describing the posture of the United States under the Trump administration – a country that has intervened in Venezuela, threatened to annex Greenland, repeatedly used its veto at the UN Security Council to block resolutions seeking to constrain Israel’s war in Gaza, and launched airstrikes on Iran. Washington’s “clear conviction,” Guterres said, was that multilateral solutions were irrelevant – that what mattered was “the exercise of the power and the influence of the United States,” even when this ran against the norms of international law.
The post-Cold War settlement, in which political conflicts were to be resolved through negotiation and force was a last resort subject to multilateral constraint, is being dismantled. There are no winners from war. Increased global militarisation does not promote peace but destroys it. We should resist it.
At the same time, we should be alert to the fact that the law of power Guterres describes did not arrive in 2026. It has been operating for decades, less visibly, through a different instrument: debt. The international financial system – dollar-denominated, managed from Washington, enforced by institutions over which debtor nations have no meaningful control – has long structured the options available to weaker countries such that compliance is the only viable path. What the Trump administration’s turn to overt military violence makes explicit is something that was already true. The architecture of international finance favours the law of power, and uses force.
In what follows, I argue that what makes debt bad is not what debt is used for, but whether the relationship it creates is coercive. The logic of domination present in sovereign lending is contiguous with the logic of increased global militarisation. Both are led by the United States and its law of power.
The Conventional Answer
Debt can get you an education, kick-start a business, and be the means by which you secure a home. It can also be a trap: payday loans with steep interest, credit cards maxed out on holidays and new tech. The conventional way of distinguishing between these cases is to ask whether the debt is productive. The productive debtor borrows to accumulate capital – improved salary expectations, business returns, property assets. The unproductive debtor borrows only to consume, or perhaps simply to survive.
This distinction is not wrong, but it answers a narrower question than it appears to. It describes prudence – whether a given borrowing decision is likely to improve the borrower’s financial position – without addressing the moral character of the relationship that debt creates. As a measure of goodness, productivity is insufficient. It judges only usefulness, without asking what that usefulness serves or whether its ends are just. A debt taken on to finance a sweatshop is productive; a debt taken on to keep a sick child alive is not.
More fundamentally, the conventional answer focuses on the ends and ignores the relationship. A mortgage and a payday loan are different not only in what they finance but in the power dynamics they establish between borrower and lender. To understand what makes debt bad, it is necessary to examine what debt does to the people bound by it.
Debt as a Power Relation
Debt is not merely a financial quantity. It is an obligation of repayment that establishes a structured relationship between a creditor and a debtor. Because it binds two parties through a claim and a responsibility, it must be understood relationally. And this relationship is inherently asymmetric: the creditor holds the claim; the debtor bears the obligation to satisfy it.
David Graeber, in Debt: The First 5,000 Years, undertakes an anthropological history of debt. In the field of economics, the origin of money is explained through the “myth of barter.” The inefficiency of barter – free exchanges between equals – leads to the adoption of coinage as an intermediary, and from this, accounts of credit and debt emerge. Graeber challenges this account. The history of money is more accurately a history of debt, not a history of coinage. Debt relationships are the more fundamental phenomenon and originate in social contexts of war, conquest, and slavery. (The Bank of England, for instance, was founded to finance a war.)
Graeber demonstrates that debt relationships rarely begin as free exchanges between equals. After all, between genuine equals, hospitality and gift economies prevail. Debt arises precisely where there is inequality, and historically, its endpoint was not repayment but bondage. In the ancient world, three conditions could make a person a slave: defeat in war, criminal punishment, and desperate poverty. In every case, slavery was an alternative to literal death. The debtor entered the relationship not from a position of autonomous choice but from one of necessity, and the creditor’s power over them was correspondingly immense.
Modern legal systems have softened the extremes — bankruptcy law, consumer protection, usury regulation. But the fundamental asymmetry persists. If debt is a relationship structured by unequal power, then its moral character cannot be judged solely by the purposes for which it is incurred. It depends on how power is exercised within the creditor–debtor relation. The argument I want to make is this: debt becomes bad when it functions as a technology of coercion.
Coercion, in this context, means something specific. It refers to the use of power to structure another’s options such that refusal carries sufficiently serious costs that compliance is no longer meaningfully voluntary. Force is what makes compliance no longer meaningfully voluntary. This may be physical force – violence and debt are historically linked, and violence is part of the enforcement of what is owed, implicitly or explicitly. It may be force through structural inequality: the capacity to set terms that the other party cannot refuse. All debt under conditions of structural inequality carries some coercive potential. The question is not whether a given debt is coercive or not, but how coercive. The answer depends on three conditions.
Three Tests
The first test asks about the origin of debt: was the debtor genuinely free not to borrow? If the entire structure of someone’s economic situation is arranged so that borrowing is the only path to participation in ordinary life – if the alternative to debt is exclusion from the means of survival – then the debt is coercive at its origin. Consider the university student in a country that has systematically defunded public higher education. She does not choose debt the way she chooses a degree subject. The choice has already been made for her, by a political settlement that privatised the cost of education while leaving the credential essential to employment. The family that borrows to cover medical costs in the absence of universal healthcare, the tenant who takes on credit card debt to bridge the gap between stagnant wages and rising rent – these are not consumers making free choices in a marketplace. They are people navigating a structure that offers debt as the only alternative to destitution.
The second test asks about the enforcement of debt: is the enforcement proportionate, negotiable, and subject to legitimate adjudication? There is no moral imperative that “one must pay one’s debts”. Even according to standard economic theory, a lender is supposed to accept a certain degree of risk. If all loans, no matter how idiotic, were still retrievable, there would be no reason for lenders to exert caution. A lender who bears no risk is not a lender but an extortionist. A debtor should have genuine recourse: the ability to challenge terms, renegotiate in good faith, or appeal to an impartial authority. At the individual level, bankruptcy law provides something approximating this. At the sovereign level, no such mechanism exists. There is no international bankruptcy court, no impartial adjudicator to whom a debtor nation can appeal. This absence is not incidental. It is the structural core of the problem to which this essay returns.
The third test asks about perpetuation: does the debt have an endpoint, or does it reproduce and deepen the conditions of dependence? Good debt has an endpoint. It builds something, it is repaid, and the relationship concludes or transforms into one of genuine equality. Bad debt is designed to be permanent. It is a machine for the continuous extraction of wealth and autonomy. Consider the payday loan that charges fees exceeding the principal within weeks, or the credit card whose minimum payment barely covers interest: these instruments do not merely take from the debtor; they reproduce the conditions that make further extraction possible.
These three conditions – involuntary origin, uncontestable enforcement, and structural perpetuation – are not separate categories of bad debt. They are mutually reinforcing features of a single phenomenon: debt as coercion. And nowhere is this phenomenon more clearly visible than in the structure of international dollar-denominated debt.
The Dollar System as Coercive Debt
The contemporary global economy is characterised by the absence of effective state management of the international financial system, the mobility and volatility of speculative capital, deep and widening inequality both within and between countries, and trade and capital account imbalances driven by financial and trade deregulation, overproduction, and underconsumption – all tending toward trade wars. This is the analysis advanced by Ann Pettifor, among others, and it provides the context for what follows.
At the centre of this system sits the US dollar, the world’s reserve currency. The dollar is not merely a medium of exchange; it is the architecture through which international debt is structured, serviced, and enforced. Apply the three tests to the debt relations this architecture produces, and the coercive character of the system becomes unmistakable.
Consider the first test, on origin. Poor countries borrow in US dollars not because this is the most rational arrangement, but because the postwar monetary architecture, Bretton Woods and its aftermath, was designed by and for the dominant military and economic power. They buy and sell essential commodities such as food, medicine, and energy in dollars, not by choice but by compulsion. The alternative to dollar-denominated borrowing is not some other, better form of borrowing. It is exclusion from the international economy altogether. These countries are not free not to borrow.
Consider the second test, on enforcement. When the Federal Reserve raises interest rates to manage American inflation, the cost of servicing dollar-denominated debt rises for every borrowing nation on earth. Other countries have no voice in that decision. The IMF and World Bank, which mediate much of this lending, impose structural adjustment conditions – austerity, privatisation, market liberalisation – that reshape debtor countries’ domestic policy without democratic mandate. When a sovereign debtor attempts to resist or renegotiate, the instruments of enforcement are formidable: credit downgrades, capital flight, trade sanctions, and in extreme cases the implicit or explicit threat of regime change. The enforcement is disproportionate and, for the weakest debtors, effectively uncontestable. The United States has long justified dollar hegemony on the basis of “global stability”; the spectre of sovereign default has allowed weightings toward the rights of creditors over the needs of debtor populations.
Consider the third test, on perpetuation. A poor country borrows in dollars to buy essential goods priced in dollars. It must export to earn dollars to service the debt. To export competitively, it must suppress wages, deregulate labour markets, and open itself to foreign capital. This weakens domestic institutions, increases inequality, and generates the very instability that makes further borrowing necessary. The debt does not resolve itself. It deepens. The debtor nation, locked into a structure it did not design and cannot exit, services obligations that grow faster than its capacity to meet them.
This is the structure Graeber identified as the deep grammar of debt throughout history: an obligation that, under conditions of sufficient inequality, ceases to be a relationship between persons and becomes an instrument of control. Orlando Patterson, writing about slavery, coined the term “social death” to describe a condition in which a person is not literally killed but is excluded from the web of mutual obligations and commitments that make a meaningful life possible – defined entirely by a relationship of power rather than by their own commitments and purposes. Graeber drew on Patterson’s concept to describe what happens to debtors under extreme asymmetry, and the parallel to sovereign debt is precise. The debtor nation, like Patterson’s slave, exists within the international system not as an agent but as an instrument of extraction. Its economic policy, its labour law, its public spending are shaped not by the needs of its people but by the demands of its creditors.
The relationship between debt and violence is not analogical. It is structural. The United States has been, since its founding, a war-debt state: a nation whose fiscal architecture was built to finance military operations and whose military operations, in turn, secure the conditions for its financial dominance. The most significant buyers of US treasury bonds have historically been banks in countries under effective US military protection. The pricing of oil in dollars, the foundation of dollar hegemony, was made possible not by market logic but by the status of Saudi Arabia and Kuwait as American military protectorates.
As Graeber observed, much though their beneficiaries do not like to admit it, all imperial arrangements ultimately rest on terror. The dollar system is not an alternative to military coercion. It is military coercion translated into financial architecture. When Trump launches airstrikes on Iran, he is not departing from the logic that sustains dollar-denominated debt. He is making it legible. Michael Hudson’s term for this is “debt imperialism”: an arrangement in which the instruments of lending and the instruments of military dominance serve the same sovereign interest and are inseparable.
What Follows
If this argument holds, then the familiar moralising about debt – that debts must be honoured, that fiscal discipline is a virtue, that defaulters are irresponsible – is exposed as something other than moral reasoning. It is ideology in service of power. The moral obligation to repay depends entirely on the moral legitimacy of the lending relationship. Where debt is coercive in origin, enforcement, and structure, the language of obligation does not describe a genuine moral claim. It describes the terms of domination. The creditor who insists on repayment while bearing no risk and permitting no renegotiation is not upholding a contract. They are exercising power.
We are watching a militarised law of power in international relations become increasingly overt, with global powers tolerating and even encouraging the use of force when the regimes in question serve their strategic interests. (I recommend reading Jacqui Cho’s article on Cameroon.) The return of open coercion in geopolitics mirrors its persistence in international finance, where debt functions as the principal mechanism by which labour is disciplined globally – sometimes literally, through debt bondage, and more broadly through the lived experience of those who work primarily to service interest-bearing loans. Coercive debt is not a contract between equals. It is a form of conquest. Recognising it as such is the first condition of resisting it.
But if what makes debt bad is not debt itself but the coercive power relation it embodies, then debt can be made better. Debt is a relationship, and relationships can be restructured. Debt is made better when borrowers have genuine freedom to refuse, when enforcement is subject to legitimate and impartial adjudication, and when the obligation tends toward resolution rather than permanent extraction. Bankruptcy law already embodies these principles at the individual level. The question is whether the international system can be reconstructed along the same lines. Revisions would mean redistributing power between creditors and debtors, and that is precisely why it has not been done. It is also precisely why it must be.
thejoyofrachel 