By Alicé Nascimento | New York Amsterdam News | Word In Black
This post was originally published on New York Amsterdam News
(WIB) – Lately, more people are saying that “authoritarianism is a boomerang.”
In my experience, a debt crisis is the wind that carries it.
Before the current crop of techno-authoritarians came to power, venture capitalists and hedge fund managers used a playbook designed to steal our futures and keep us in debt. Black, Latin, and Indigenous people know this playbook because it’s as old as colonialism itself: buying up debt and suing nations for maximum payout.
We’ve been here before. The main difference in Jim Crow 3.0 is how debt injustice is propped up by our financial systems and inequality is automated. Put another way, predatory hedge funds have spent decades making it more expensive to be poor for all of us.
They’re using a simple formula — “Buy, dominate, extract” — tested first in the Caribbean, South America, and the Congo. I’m not talking about something that happened 200 years ago, either. I’m talking about the last few decades — 20 years, 10 years, in your recent memory.
When a country is already buried in debt, at a certain point, it has to admit it can’t pay back the loans it has taken out to pay for essential services. Creditors such as banks or other countries will sometimes look for a way to recover some of the money they’re owed by selling that debt — and that’s where the vulture fund playbook comes in. These hedge funds buy the debt cheaply, and then sue the struggling nation, forcing it to pay back the full amount, plus interest. As a result, debt-burdened nations have to dramatically cut their budgets to make ends meet. This includes cuts to essential services that result in school and hospital closures, dwindling disaster funds, and pensions whittled down to nothing.
This is why your cousins are still trying to figure out if they can afford to move from Puerto Rico to the continental U.S. It’s why your auntie from the Democratic Republic of Congo moved to Brooklyn but still makes time to raise money for loved ones back home. It’s why your family in Grenada is prepping for the next climate disaster while they’re still struggling to recover from the last one.
The government told them there was no money to help, in part because New York-based hedge funds sued these debt-burdened nations into further disaster.
A legal loophole in New York State law made this possible.
Half of the world’s sovereign debt bonds are issued under New York State law and move through its legal system. Hedge funds preying on nations’ debt also rely on rulings in the federal court system here to benefit their bottom lines.
How is this happening? Because the laws that set rules for how businesses can buy up debt for less than it’s worth have a loophole that allows hedge funds to turn around and sue immediately for the full original amount. That’s the floodgate we’re fighting to close. As New Yorkers, we’ve seen how predatory hedge funds scavenge our resources to enrich themselves while our people face widespread job loss, unlivable wages, cuts to public services, and displacement.
Hedge funds are cashing in on colonialism because the economic system that sustains them keeps getting deregulated in the name of “what’s good for business.” It never asks “what’s good for people?” Over the past 20 years, these funds have purchased debt for pennies, then sued nations to demand full repayment — driving the closure of schools and hospitals, the end of pension funds, and cuts to support services that help with climate disaster recovery.
Our pain is their payday.
The Debt Justice Alliance formed because we’re working New Yorkers who have been directly affected by these predatory debt practices. Right now, our neighbors are selling plasma to afford their meds or setting up gofundme accounts to keep a roof over their heads — while hedge funds are making bank off the debt crisis.
Vulture hedge funds have tried to defend their predatory policies over the years, but the same hedge funds that reject accountability measures have sued national governments into austerity, resulting in dwindling disaster relief funds and hospital closures. Setting common sense standards for debt recovery is about creating pro-people policies that protect our neighbors and loved ones.
If there’s one thing you should know about New York, it’s that we don’t sit by while corporations empty our wallets. We’ve seen it all, from Madoff to MLMs to memecoin. The sovereign debt crisis is costing New Yorkers millions at a time when our tax dollars could be going to fund libraries, schools, and better healthcare.
The Debt Justice Alliance has been organizing for four years to close the loophole. We’re a coalition of Black and Latin, working-class, and directly affected people organizing together to stop predatory hedge funds. It’s a scam — and we’re here to stop it, because recovering from debt should be an actual possibility in our lifetimes, not a far-off dream.
Last year, we won a big step forward after working on a bill to close the loopholes that made it through the New York Senate. This year, we’ve brought two bills to the New York State assembly to fight to protect Black and Latin communities, working people, and our loved ones. We’re working to make just debt recovery a reality for all.
Alicé (Ah-lee-see) Nascimento is director of campaigns at New York Communities for Change (NYCC), one of the largest grassroots community organizations in the U.S. and a member of the Debt Justice Alliance (DJA). She works on a variety of campaigns at NYCC, from corporate and Wall Street accountability to climate finance.
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