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Unearthing the Historical Significance of the Debt Peonage System

Historical Significance of the Debt Peonage System
The debt peonage system forced laborers to work as 'peons' until their debts were paid off. Many were often oppressed, and were offered minimal or no wages, due to which, it was not possible for them to repay the debts. Historyplex talks about the historical significance of this inhumane system, its background, and the consequences it had.
Neha B Deshpande
Last Updated: Jul 25, 2017
Quick Fact
The Peonage Abolition Act of 1867 abolished the debt peonage system, i.e., it stated that holding any person in servitude in return of any debt or loan, will be considered as illegal.
Debt peonage is a system wherein a debtor is forced to serve under his creditor until the debt is paid off. The debtor works like a 'bonded laborer'. He is forced to work in the given circumstances without any compensation, and thus compelled to work as a slave.
Slavery has prevailed in many societies, wherein slaves were traded off, forced to work for long, and tortured to great extents. However, debt peonage imposed the slavery system indirectly. With a wide economic difference in the rich and the poor, and the lack of employment opportunities, many were forced to work in inhuman conditions with no or very less compensation for their work.

Though such inhuman practices are illegal, they have been a part of the history of almost every culture, and sadly, have not been completely eradicated even today. In the peonage system, the indebted are forced to work under their creditors. They often work in unhealthy conditions, where sanitation is not taken care of, and get no returns for their work. This system was practiced so that the capitalist or feudal lords could enjoy cheap labor. Here is a brief account of the historical significance of the debt peonage system.
History Of Debt Peonage
How Debt Peonage Started
Debt peonage started with the growing needs of agriculture, and industrial and allied activities. In a bid to obtain cheap labor, the natives were cheated and offered very little wages for their services. They were often pushed into taking debts. And in return, they had to serve as laborers. However, they were never made debt-free. In fact, such circumstances were created, that they were forced to take more debts. The ugly face of debt peonage started showing in different parts of Peru, Guatemala, and Mexico.
Debt Peonage in the U.S. History
Debt peonage started in the southern parts of the US. After the civil war, there were hopes of a complete banishment of slavery. Though debt peonage was banned and made illegal by the Congress around 1867, the African-Americans were still dependent on the rich for meeting their daily needs. Many of them did not even own lands. This led to the system of sharecropping.
What is Sharecropping?
After the reconstruction, many land owners were still trying to re-establish the debt peonage system, and one of the methods was sharecropping. Sharecropping refers to a practice where the laborers were allowed to use land, in return of a certain share in the crops produced. The owners gave them land and other supplies required to carry out farming. In return, they had to give a certain percentage of the money they earned from the crops, to the owners. The prices of the supplies were too high, and hence, it was too difficult for the laborers to repay them. Thus, during this period too, debt peonage did exist, though in a different form.
Impact of Debt Peonage
Due to sharecropping and debt peonage, the system of slavery survived in some form or the other. Sharecroppers were bound by the arrangement, and thus, had very little or no economic freedom. Also, there were no other employment opportunities available for them. Lack of knowledge and education made them an easy prey and reduced them to a life of debts. Many of them migrated to the northern parts of the country to escape from this. Some found other jobs due to vacancies created by war. However, some of them still continued to suffer working as sharecroppers.
The background of debt peonage, racial discrimination, and lack of opportunities, gave birth to the Civil Rights Movement in the 19th century, between the 1950s and 1960s. Following the movement, the Civil Rights Act of 1964 was passed that outlawed the Jim Crow law (which mandated the segregation of public places on the basis of color). All acts of discrimination on the basis of race, gender, or color were to be considered illegal as per this act.
History Of Debt Slavery In Other Parts Of The World
In the Greek Civilization
The Athenians had a very dark history, where economic inequality was rampant. They had the practice of debt slavery, where the slaves were subjected to atrocities, forced to work as miners or caretakers. These slaves had no right to individual freedom, and the future of their children was uncertain. The masters could sell, trade, or rent their slaves as per their will. Solon has been credited for bringing anti debt slavery reforms, and freeing the slaves.
The Nexum System in Ancient Rome
In the context of Roman Law, Nexum was a structure wherein, for repayment of a loan, the debtor, known as a 'Nexus' foregoes his free will and lives as per the wish and whim of the creditor. The 'Nexus', however, retained his Roman citizenship right. According to the historian Livy, the Lex Poetelia Papiria law was passed aiming at stopping this practice of bonded labor and freeing the Nexi from the bond.
In India (Asia)
The debt bondage structure in India has had a long history. Discrimination on the basis of caste system was prevalent in many parts of the country. Loans given by landlords to petty farmers from the lower economic sections were the primary reason for debt bondage, since labor was the only option for repayment. The sad reality was that such debts were passed forward to the succeeding generations, and many children had to work as laborers for the creditors.
The situation was brought under control with the efforts of the Indian government and social reformist movements that aimed at uplifting the backward caste. However, even today, there are cases of farmers committing suicide on not being able to repay loans.
In the Recent Times
In the modern times, one can still see the system of debt peonage, though the form is very different. We borrow from banks and institutions, and many of us are stuck in the cycle of repaying the debts, or in getting back our assets encumbered and mortgaged with loans. And we end up paying heavy interests. Once we become a part of this debt cycle, it becomes very difficult to come out of it. In a way, even this is debt peonage, or a sophisticated version of it.
Sadly, systems like debt peonage continue to exist in some form or the other, in a few parts of the world, even today. There have been many uprisings against such practices, and opponents have maintained that depriving people of their right to freedom in the name of recovering debts, is wrong.