Stories about what we now call “the homeland,” its origins and unfolding, do not, conventionally, feature capitalism. Other tales about the country’s history usually take priority. Favorites include, perhaps first and foremost, the New World as the incubator of liberty and democracy in the Western world. Others emphasize the nation’s embrace of people from a global everywhere, America as the nation of nations. Another is heroic and tracks the conquest of frontiers, both physical and spiritual, a legendary odyssey requiring fortitude and audacity. Organically tied to that one is the apotheosis of America as the land of entrepreneurial genius, derring-do risk-taking, a business civilization resting on a human landscape of indigenous inventiveness. The last tale does indeed spill over into a celebration of capitalism, but less as a form of political economy, more as an epiphany of the self-made man, cleansed of the social abrasions that real capitalism inevitably trails in its wake.

Freedom anchored in acts of self-reliance and the mastery of the market, of nature, of the libido, of other people can be intoxicating, functioning like an aphrodisiac. Even if its social reach recedes as capital accumulation becomes the exclusive terrain of only the mightiest conquistadors, the dream abides.

The New Deal, or the Keynesian social welfare and administrative state, was something new under the American capitalist sun. It civilized the laissez-faire regime by regulating finance and industry, by recognizing certain collective rights of the organized working class, by establishing a minimum level of material survival, and by licensing the state to intervene into the marketplace, using the levers of fiscal and monetary policy to even out the wild oscillations of economic boom and bust that threatened to undermine the social order fatally. Although this outcome preserved the basic framework of capitalism, it also required a sea change in the way ruling circles behaved; in the scope and powers of the central government; in the reigning ideology crafted to explain and justify the New Deal order that was so at odds with the social Darwinism of an earlier epoch; in the internal composition of the Democratic Party; and in the degree to which capitalism was obliged to make more room for democracy. Whatever the severe limitations of this new world, these were not inconsiderable changes from what the country was accustomed to and they point to the malleability of capitalism.

In the 1820s and 1830s, as artisans, journeymen, sailors, longshoremen, and other workers organized the early trade-union movement as well as workers’ political parties, one principal demand was the abolition of imprisonment for debt. Inheritors of a radical political culture, their complaints echoed that biblical tradition of Jubilee mentioned in Leviticus, which called for the cancellation of debts, the restoration of lost house and land, and the freeing of slaves and bond servants every fifty years.

Falling into debt was a particularly ruinous affliction for those who aspired to modest independence as shopkeepers, handicrafters, or farmers. As markets for their goods expanded but became ever less predictable, they found themselves taking out credit to survive and sometimes going into arrears, often followed by a stint in debtors’ prison that ended their dreams forever.

All the highways of global capitalism found their way into the trackless vastness of rural America. Farmers there were not in dire straits because of their backwoods isolation. On the contrary, it was because they turned out to be living at ground zero of the capitalist economy, where the explosive energies of financial and commercial modernity detonated. A toxic combination of railroads, grain-elevator operators, farm-machinery manufacturers, commodity-exchange speculators, local merchants, and, above all, the banking establishment had farmers at their mercy. Their helplessness was only aggravated when the nineteenth-century version of globalization left their crops in desperate competition with those from the steppes of Canada and Russia as well as the outbacks of Australia and South America.

To survive this mercantile onslaught, farmers hooked themselves up to the long lines of credit that stretched back to the financial centers of the East. These lifelines allowed them to buy the seed, fertilizer, and machines they needed to farm; pay the storage and freight charges that went with selling their crops; and keep house and home together while the plants ripened and the hogs fattened. When market day finally arrived, the farmers found out just what all that backbreaking work was really worth. If the news was bad, then those credit lines were shut off and they found themselves dispossessed. The family farm and the network of small-town life that went with it were being swept into the rivers of capital that were heading for metropolitan America. [...]

Facing dispossession, farmers formed alliances and set up cooperatives to extend credit to one another and market crops themselves. As one Populist editorialist remarked, this was the way “mortgage-burdened farmers can assert their freedom from the tyranny of organized capital.” But when they found that these groupings couldn’t survive the competitive pressure of the banking establishment, politics beckoned.

From one presidential election to the next, and in state contests throughout the South and West, irate grain and cotton growers demanded that the government either expand the paper currency supply (“greenbacks,” also known as “the people’s money”) or monetize silver (again, to enlarge the money supply), or that it set up public institutions to finance farmers during the growing season. With a passion hard for us to imagine, they railed against the “gold standard,” which, Democratic Party presidential candidate William Jennings Bryan famously cried, should no longer be allowed to “crucify mankind on a cross of gold.” Should that cross stay fixed in place, one Alabama physician prophesied, it would “reduce the American yeomanry to menials and paupers, to be driven by monopolies like cattle and swine.” As Election Day approached, Populist editors and speakers warned of an approaching war with the money power, and they meant it: “The fight will come and let it come!”

Rumblings about debt servitude could certainly still be heard. Foreclosed farmers during the Great Depression mobilized, held “penny auctions” to restore farms to families, hanged judges in effigy, and forced the Prudential Insurance Company, the largest land creditor in Iowa, to suspend foreclosures on 37,000 farms (which persuaded the Metropolitan Life Insurance Company to do likewise). A Kansas City realtor was shot in the act of foreclosing on a family farm; a country sheriff was kidnapped while trying to evict a farm widow and dumped ten miles out of town. Urban renters and homeowners facing eviction formed neighborhood groups to stop local sheriffs or police from throwing families out of their houses or apartments. Furniture tossed into the street in eviction proceedings would be restored by neighbors, who would also turn the gas and electricity back on. New Deal farm and housing-finance legislation bailed out banks and homeowners alike. Right-wing populists, like the Catholic priest Father Charles Coughlin, carried on the war against the gold standard in tirades tinged with anti-Semitism. Signs like one in Nebraska that said “The Jew System of Banking,” illustrated with a giant rattlesnake, showed up too often. But the age of primitive accumulation, in which debt and the financial sector had played such a strategic role, was drawing to a close.

In our time, the financial sector has enriched itself by devouring the productive wherewithal of industrial America, starving the public sector of resources, and saddling ordinary working people with every conceivable form of consumer debt. The deindustrialization of America, which began in the 1970s and has continued ever since at an accelerating rate, was set in motion by the country’s leading financial institutions. All those mergers and acquisitions, leveraged buyouts, junk-bond acquisitions, and the “lean and mean” asset-stripping that followed saddled the productive sectors of the economy with insupportable debts. These were, on the one hand, lucrative securities for the banks and private-equity and venture-capital firms that issued them. But for ordinary working people, they delivered plant shutdowns, massive layoffs, declining real wages, diminished pensions, and reduced or nonexistent health care. And then came the unconscionably profitable securitizing of the homes where people lived—and in due time could no longer live. Taking on ever greater loads of debt has become, for many, the only way to tread water. Household debt, which in 1952 was at 36 percent of total personal income, had by 2006 hit 127 percent. Even financing poverty became a lucrative enterprise. Taking advantage of the low credit ratings of poor people and their need for cash to pay monthly bills or simply feed themselves, some check-cashing outlets, payday lenders, tax preparers, and others levy interest rates of 200 percent, 300 percent, and more. As recently as the 1970s, a good part of this would have been illegal under usury laws that no longer exist. These poverty creditors are often tied to the largest financiers, including Citibank, Bank of America, and American Express.

Credit has come to function as a plastic safety net in a world of job insecurity, declining state support, and slow-motion economic growth, especially among the elderly, young adults, and low-income families. More than half the pretax income of those three groups goes to servicing debt. Nowadays, however, the company store is headquartered on Wall Street. Debt is driving this system of autocannibalism [...]

It was bad enough for craftsmen to see their own livelihoods and standards of living put in jeopardy by “free” wage labor. Worse still was to watch unfree labor do the same thing. At the time, employers were turning to that captive prison population to combat attempts by aggrieved workers to organize and defend themselves. On the eve of the Civil War, for example, an iron-molding contractor in Spuyten Duyvil, north of Manhattan in the Bronx, locked out his unionized workers and then moved his operation to Sing Sing penitentiary, where a laborer cost forty cents, $2.60 less than the going day rate. It worked, and Local 11 of the Union of Iron Workers quickly died away.

Slaves, artisans, homesteaders, European peasants, small-town storekeepers, Southern hillbillies, and prairie sodbusters weren’t consigned to reservations. But they were the raw material, as were Native American buffalo hunters and subsistence agrarians, of a process of primitive accumulation which drove them to extinction and without which Klein’s miracle is inconceivable. If Native Americans ended up on reservations, all these other refugees from preindustrial ways of life and of making a living ended up as the proletarians of factory and field or as their near relations, toiling away as convict laborers, indebted tenants and sharecroppers, and contract laborers, comprising a whole menagerie of semifree peonage. The miracle of capital accumulation in the Gilded Age depended on a second miracle of disaccumulation happening outside the boundaries of capitalism proper. It proceeded relentlessly, appropriating land and resources both human and natural that had once been off limits because they were enmeshed in alternative forms of slave, petty, and subsistence economies: plantation monocultures, smallholder agriculture both in America and across southeastern and central Europe, handicraft production on both sides of the Atlantic, mercantile activities serving local markets, and an enormous variety of family businesses filling up the arteries of production and distribution. Liberated from these premodern systems of social reproduction, some of their denizens were free (or, rather, were compelled) to take on their fateful role as wage labor or its close facsimile; that is, they became the bone and sinew of the industrial capital accumulation [...]