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Debt bondage (or bonded labor) is an arrangement whereby a person is forced to pay off a loan with direct labor in place of currency, over an agreed or obscure period of time. When the debtor is then tricked or trapped into working for very little or no pay, or when the value of their work is significantly greater than the original sum of money borrowed, some consider the arrangement to be a form of unfree labour or debt slavery. It is similar to peonage, indenture or the truck system.

Legal Definition

Debt bondage is classically defined as a situation when a person provides a loan toanother and uses his or her labour or services to repay the debt; when the value of thework, as reasonably assessed, is not applied towards the liquidation of the debt, thesituation becomes one of debt bondage. See United Nations 1956 Supplementary Convention on the Abolition of Slavery.

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.

A modernization of the feudal system was "peonage", where debtors were bound in servitude to their creditors until their debts were paid. Although peons are only obliged to a creditor monetarily.

Historical peonage

Peonage is a 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 may extend credit to laborers to buy from employer-owned stores at inflated prices. This method is a variation of the truck system (or company store system), in which workers are exploited by agreeing to work for an insufficient amount of goods and/or services. In these circumstances, peonage is a form of unfree labor. Such systems have existed in many places at many times throughout history.

Historical examples

  • In Colonial America, some settlers used indentured service to obtain passage or an initial settlement, then continued working independently after completing their bonded labor.

  • The American South - Such a system was often used in the southern United Statesmarker after the American Civil War where African-American and poor white farmers, known as sharecroppers, were often extended credit to purchase seed and supplies from the owner of the land they farmed and pay the owner in a share of the crop.

  • In Perumarker a peonage system existed from the 1500s until land reform in the 1950s. One estate in Peru that existed from the late 1500s until it ended had up to 1,700 peons employed and had a 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.

Thousands of such laborers were sold into slavery during the West African slave trade and ended their lives working as slaves on the plantations in the New World. For this reason, section 2 of the Slave Trade Act 1843 enacted by the British Parliament declared "persons holden in servitude as pledges for debt" to "be slaves or persons intended to be dealt with as slaves" for the purpose of the Slave Trade Act 1824 and the Slavery Abolition Act 1833.

It continued to be very common in Africa and Chinamarker, but was suppressed by the authorities after the establishment of the People's Republic of Chinamarker. . It persists in rural areas of Indiamarker, Pakistanmarker and Nepalmarker.

In Nigermarker, where the practice of slavery was outlawed in 2003, a study found that almost 8% of the population are still slaves. Descent-based slavery, where generations of the same family are born into bondage, is traditionally practised by at least four of Niger’s eight ethnic groups. The slave masters are mostly from the nomadic tribes — the Tuareg, Fulani, Toubou and Arabs.

40 million people in Indiamarker, most of them Dalits, are bonded workers, many working to pay off debts that were incurred generations ago. These figures are comparable to ones in Boliviamarker, Brazilmarker, Perumarker and Philippinesmarker. There are no universally accepted figures for the number of bonded child labourers in Indiamarker. Of 20 million bonded labourers in Pakistanmarker 7.5 million are children.

Modern views

According to Anti-Slavery International, "A person enters debt bondage when their labor 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 laborer is greater that the original sum of money borrowed or advanced."

According to the Anti-Slavery Society:

At international law

Debt bondage has been defined by the United Nations as a form of "modern day slavery" and is prohibited by international law. It is specifically dealt with by article 1(a) of the United Nations 1956 Supplementary Convention on the Abolition of Slavery. 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 labor, but one of the worst forms of child labor in terms of the Worst Forms of Child Labour Convention, 1999 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." Other estimates place the number as high as 40 million. Researcher Siddharth Kara has calculated the number of slaves in the world by type, and determined the number of debt bondage slaves to be 18.1 million at the end of 2006. He has updated this number for the end of 2009 to be 18.4 million, the increase primarily as a result of the 2007 global commodity bubble, followed by the global economic crisis of 2008 and 2009.

Modern examples

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 smuggled to destinations in Western Europe. This form of debt bondage also takes place in other parts of the world, such as women moving from Southeast Asia or Latin America.

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 inheritance 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 often 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.

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