age of marketing in mogolia

D AV I D S N E AT H

The ‘age of the market’ and the regime ofdebt: the role of credit in the

transformation of pastoral Mongolia1

Since the decollectivisation of the rural economy in the 1990s, Mongolian pastoralists have become subjectto the new property regime of the ‘age of the market’ (zah zeeliin uye). Formerly collective assets, such aslivestock, machinery and buildings, have become private property and land is increasingly becoming a resourceavailable for private ownership. International finance and development agencies have advocated credit schemesfor pastoralists faced with uneven annual income and the servicing of debt has become a central burden foran increasing number of Mongolian households. In the neoliberal era, the pastoral sector has become highlyvulnerable to climatic variation. The distribution of environmental risks alongside processes of collateralisationhas expanded the sphere of monetised relations and made pastoralists dependent upon increasingly globalmarkets for commodities and credit. This new regime of debt has interesting historical parallels with theQing-era barter trade that impoverished pre-revolutionary Mongolia.

Key words debt, Mongolia, neoliberalism, credit, finance, development, transaction, primitive globalization,political economy

I n t r o duc t i o n

Since the 1990s Mongolians have seen the transactional, quantifying logic of the marketexpand to entangle an ever-greater set of social relations. In the new neo-liberal politicaleconomy, timely money became a scarce resource and essential requirement, onethat could be made to command a premium price through high interest rates. Mosthouseholds became subject to a regime of debt that linked their fortunes to the nationaland international financial markets. It might seem implausible to suggest that debthas only recently appeared in Mongolia. Surely people have always been enmeshed inthe obligations created by systems of exchange? But this thinking reflects Graeber’spoint that ‘our common-sense assumptions . . . tend to reduce all human relations toexchange, as if our ties to society, even to the cosmos itself, can be imagined in thesame terms as a business deal’ (Graeber 2011: 18). In this view some form of debt mightappear to be a social inevitability, an enduring aspect of the human condition. Leach, forexample, saw social relations themselves as forms of debt: ‘persisting relationships onlyexist as feelings of indebtedness’ (Leach 1982: 154). But more recent anthropology haschallenged the classical application of the notion of exchange that has, as Hunt (2002:

1 This paper draws upon material collected by the ‘Oral History of Twentieth Century Mongolia’project funded by an AHRC grant [AH/E002277/1].

458 Social Anthropology/Anthropologie Sociale (2012) 20, 4 458–473. C© 2012 European Association of Social Anthropologists.doi:10.1111/j.1469-8676.2012.00223.x

THE ‘AGE OF THE MARKET’ AND THE REGIME OF DEBT 459

115) points out, tended to obscure alternative modes of allocation that he describes as‘transfers’.

On reflection then, debt is clearly produced by a particular set of institutionalformations within a given political economy; it cannot be taken for the substanceof human relations, not even those that produce transfers of material goods. This isbecause debt is made to appear by the transactional logic of the exchange idiom, whichis only one of the possible schemas used for the distribution of what economists wouldterm goods and services. In Mongolia objects and help may be subject to transactionallogics, and these may be commercialised and commoditised and subject to the logics ofmonetary economy. But many things are provided for others using non-transactionallogics; ones that do not produce ‘debt’ as such at all.

Very substantial material flows are generated by obligations owed to relatives, forexample, such as providing idesh – food supplies. Close relatives of herding householdscan expect meat in winter, and dairy products in summer, and this is often a significantproportion of a household’s total livestock product.2 In the collective era, all sorts ofgoods and assistance were obtained from relatives and friends through what was termedtanil tal (networking, literally ‘friend/acquaintance side’). Although these practiceshave declined markedly since that time, they remain important. One might term suchtransfers an ‘economy of favours’, ‘indigenous service economy’ (Gell 1992), ‘exchangenetwork’ or ‘field of reciprocity’, but they are not talked of as such, and the relationshipsare substantially distinct. These sorts of transmissions are so common and expectedthat they can be seen as materialisations of the social relations themselves, a result ofexpectations and obligations generated by kinship and friendship connections. As I haveargued elsewhere (Sneath 2006), rather than transactions, we can see these as enactionsof aspects of persons and roles for which the language of obligation and expectation ismore appropriate than the idiom of exchange.

Social relations with strangers may also be materialised in transfers. In everydayrural life, expectations of hospitality (zochlomtgoi zan) entail routine material transfersto others. Old friend or complete stranger, any visitor to a herding household may expectto receive tea, dried curds and other snacks, at the absolute minimum, and usually a mealand night’s stay if needed. If consumables are visible, then a guest may help themselves,and the way to ask for something is simply to ask if there is any (bainuu?). Transfersof this sort can be very substantial, but they do not produce debt. We might apply theterm to one of these relationships and ascribe a feeling of indebtedness to one or otherparty, but in reality the term or (debt) could not be properly applied to this relationship.A quite different vocabulary is used for obligations (uureg) and favours (ach).3

2 See Sneath (1993) for a more detailed account of rural networks in the late state socialist and earlyneoliberal period.

3 Gift giving remains very common, for example, and does not answer to transactional logic. Inmost cases presents are seen as legitimate ways of showing gratitude or respect and are defined inappropriate terms e.g. beleg (gift), to ‘honour the hand’ (gar tsailgah). A middle-aged man who wasengaged in obtaining a university place for his son gave a substantial gift to an educational official,but, he explained, ‘this was not a bribe, but he helped me in this matter so I “honoured his hand”(gar tsailgah), I wanted to express my gratitude.’ Literally ‘. . . ene n’ heel hahuul’ bish harinminiiajilyg buteej ogcon uchraas garyg n’ tsailgaj, ooriinhoo bayarlasan setgeliin ilerhiilel bolgon ogson gejyar’j baisan yum’ (see Sneath 2006: 99). This is entirely different from the conceptual vocabulary oftransaction; indeed if it was described in such terms it would be considered unambiguously corrupt.

C© 2012 European Association of Social Anthropologists.

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Mongo l i a ’s ‘ age o f t he ma r ke t ’

The neoliberal reforms of the early 1990s dismantled Mongolia’s state socialist economyand plunged the country into a deep economic crisis. The security of employment instate enterprises evaporated, poverty and unemployment soared. Families were forcedto develop diverse coping strategies to make ends meet in the new climate. The abilityof most people to help members of their networks declined. The cousin who used tobe able to get leather from his work in the boot factory had lost his job; if his relativesneeded some they would have to buy it. The truck driver who used to take his friend’schildren to school had no fuel to make the trip, unless the family could find the cashfor him to buy some. Relations of mutual help became entangled in monetised logics,and since many people now needed cash, the most common requests for help becameappeals to borrow money. Almost everyone, then, became enmeshed in monetised websof obligation now quantified in terms of cash.4

The rapid growth of lombard – pawnbroker shops – in the 1990s reflected this newreality.5 Pawning valuables became a common strategy for people thrust suddenly intothe margins of poverty. The use of the lombard tended to become cyclical; people wouldsurrender items as security for a loan, later when they found the money they would payoff the debt and interest and reclaim their property, only to find that they were forcedto pawn valuables again when their money ran out (Højer 2012). As they became moreestablished, however, commercial banks began to offer personal loans, particularly forlarger sums. This process of collateralisation is one way in which new assets, resourcesand values have been produced. All sorts of things became economic resources thathad not been available to such a discourse in the past. Land, for example, became a realor potential economic resource since the advent of a programme of privatisation thatbegan with urban land and is now interacting in complex ways with the rights to thestill largely public pasture-land. All sorts of items moved into the commercial realm ifthey could be made collateral for loans: at first the apartments privatised in the 1990s,then plots of land as they became forms of property; even fashionable mobile phonenumbers and desirable number plates have become valued so that they can be used ascollateral.

The contemporary regime of debt has emerged along with two sorts of insecurity.The first is the familiar uncertainties of market fluctuation. The changing prices ofproducts that people rely upon for their livelihoods may present households withunexpected falls in income. In the global recession of 2008, for example, the pricesof cashmere plummeted, causing a sharp reduction in rural incomes. Cashmere hasbecome one of the few livestock products that is still exported in the neoliberal era and

4 These personalised debts between family and friends can also sever relationships. In 2010, forexample, the man I shall call ‘Dorj’ was the executive director of a company in Ulaanbaatar importingkitchen goods and had saved a considerable amount of capital. He decided to help six of hisunemployed friends by buying each a taxi for around US$3,000–4,000 (4–5 million MNT), each onthe understanding they would repay this over a year or so by paying US$16 (20,000 MNT) eachworking day. Within a few months none of the six were able to keep up these payments, but sincehe understood they had genuine financial difficulties he was reluctant to press them to repay. Hisfriends started avoiding him because of their embarrassment and the result was the loss of both hiscapital and these friendships.

5 Lombard is the Russian name for pawn-shop, derived from the northern Italian region of Lombardyassociated with this form of finance in the Middle Ages.



commands good prices. Mongolian pastoralists have doubled the proportion of goats intheir herds since the early 1990s, and most have become heavily reliant upon the incomefrom cashmere sales. Since 1992 prices have boomed and bust three times, droppingfrom around US$100 a kilo in the peaks to about half this value in the troughs. Theprices paid to pastoralists are much lower, of course, but follow the fluctuations, so theprices they could expect dropped from US$42 a kilo in 2007 to just US$12 a kilo in 2008(Marin forthcoming: 13), and bounced back to around US$40 a kilo in 2010. Similarmarket fluctuations affect all businesses, of course, creating comparable – if usually lessdramatic – fluctuating fortunes for urban households. The other sort of risk isenvironmental, and this is a particular problem for pastoralists. Harsh winters andsummer droughts can lead to the loss of very large numbers of livestock. Manyhouseholds have lost their entire herds as the result of extreme weather, and insuch situations herders are often forced to take on debts. This problem, what Marin(forthcoming) calls ‘double exposure’ – to both market and environmental risks – hashelped fuel a new regime of debt in Mongolia.

The o l d r eg ime o f deb t

In the 20th century, Mongolia experienced two transformations of social order: in the1920s from aristocracy to Soviet-style state socialism, and in the 1990s from modernistsocialism to neoliberal democracy. Each of these transformations introduced new stateorthodoxies and associated political economies. Although in general the introductionof Soviet modernism was the most far-reaching transformation, when it came to theorganisation of animal husbandry, upon which most rural inhabitants rely for theirlivelihoods, there were certain ways in which the neoliberal era represented a moreradical break with the past. The new regime of property and citizenship that wasintroduced was one in which district authorities were no longer able to commandlabour to maintain local political economies (Sneath 2004).

In other ways, however, Mongolia’s ‘age of the market’ has produced features thatresemble the pre-revolutionary political economy. One of these is the role of debt.In the 18th and 19th centuries, Mongolia became enormously indebted to Chinesefirms, within the Qing empire. In the late 19th century, the increasingly impoverishedpopulation struggled to pay the interest owed on debts, which in some districts exceededthe total capital value of all the property in the unit (Bawden 1968: 203). Historiansconsider the burden of ever-accumulating interest a major cause of the social unrest thatfuelled the struggle for independence and led to the foundation of the Mongolian statein 1911 (Bawden 1968; Sanjdorj 1980).

In pre-revolutionary Mongolia, commoners, aristocrats and local government allborrowed heavily, at high rates of interest, from Chinese merchant firms who tradedconsumer goods for livestock products. These firms operated in each of the principalities(hoshuu) that made up the Mongol territories of the Qing and the later independentBogd Khaan state. They had become closely intertwined with the aristocratic state,financing various occasional needs of princely administrations, and supplying allsorts of consumer goods to their subjects. These firms became, in effect, partners(albeit ultimately junior ones) in the administration of the aristocratic state. Indeed,hoshuus generally appointed one such merchant house to be its tunsh – partner or


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associate – to act as its principal banker and favoured commercial agent. The hoshuuas an administrative unit frequently serviced a debt with their tunsh, and nobles oftentook personal loans amounting to thousands of silver taels (ounces). However, theyoften managed to get some or all of this debt transferred to their subjects (Atwood2004: 97, Bawden 1968: 100, 203; Sanjdorj 1980: 80). The crushing poverty and dismalliving standards of the hopelessly indebted commoners of Mongolia struck 19th- andearly 20th-century European travellers as extreme. This regime of debt left its mark: thesaying goes orgui bol bayan, ovchingui bol jargal – ‘to be without debt is to be rich; tobe without illness is to be fortunate’.

Much of the commoner debt was produced in particular ways. The dominantcommercial transactional form at the time (one that emerged again in the 1990s) was‘barter-trade’, in which merchants took useful goods out to pastoral encampmentsand traded them directly for livestock or livestock products. Silver and other formsof cash held limited appeal for people several days’ ride from any place where youcan purchase goods, and mobile pastoralists have long tended to want to acquire thegoods they need on the spot. However, these ‘barter’ transactions were monetised inthe sense that the values of the items traded were calculated in terms of money pricesand translated on the spot into goods, so that the difference could be made up usingone of the various currencies in circulation (the main ones being silver, tea and sheep).Frequently, however, pastoralists needed goods that they could not pay for, and ranup debts. Partly this reflected the pastoral cycle – products such as wool and cashmereonly appear in certain seasons and this might not coincide with needs. The merchanthouses also specialised in loans of currency – the main ones being silver and tea blocks –that might be needed to pay tax liabilities. They would often leave the livestock tradedin this way for the pastoral household to herd for them and under these arrangements,which reflected the established sureg tavih relations for leasing out herds, the offspringof their animals also became their property. If these livestock were lost as a resultof bad weather or other causes, the household would be left with the debt, whichwould increase in line with the expected growth of the herd. The Mongolian languagereflects the reproductive logic of these property relations. The term for the interestgenerated by a loan is huu, which means son, boy or child. Indeed the term for finance issanhuu – composed of san (treasury/wealth) and huu (son/interest), since it entailedmanaging the growth of wealth.

By the 19th century, merchant houses owned huge numbers of livestock.6 Thedebts mounted, and by the early 20th century had become so great as to defy anyrealistic prospect of repayment, despite enormous livestock exports (Onon and Pritchatt1989: 4; Atwood 2004: 97). However, the debt itself was overtaken by political events.The Soviet-backed Mongolian People’s Revolutionary Party gained power in the early1920s, eliminating the aristocratic and monastic elite, and expelling Chinese merchantfirms and their debts in 1928. At first the new state struggled to construct any sortof centrally-planned economy, but it made rapid progress after World War II whenSoviet investment fuelled the growth of industry and urban centres. Pastoralists were,eventually, relatively successfully integrated into the new national economy throughthe introduction of large politico-economic territorial units – the collectives (negdel)and state farms (sangiin aj ahui).

6 Sanjdorj (1980: 91), for example, notes that in the late 19th century Chinese traders were taking25,000 horses, 10,000 cows and 250,000 sheep from the area of Ih Huree alone every year.



Introduced largely in the 1950s, the collectives and state farms managed pastoralism(and some agriculture) in each local government district (sum). They typically includedsomething in the order of 1,000 households, about half of whom were specialist mobilepastoralists living in encampments throughout the district, and the other half workingin support and service jobs in a central settlement. Pastoral households were organisedinto small groups called bases (suur’), and these were grouped into production brigades(brigad) and sections (heseg). Households were assigned livestock to herd, and receiveda regular income. The collectives owned the bulk of the livestock of the district butherding households were allowed a certain number of livestock (50, in the 1980s, orin some regions 75) of their own to supply domestic needs. Brigades and sectionswould move livestock to different allocated seasonal pastures, and when necessarycollective managers would employ the pastoral technique of otor, by which livestockare repeatedly moved over distant and lesser-used pastures at times of fodder shortage,as a method of intensively feeding them (Humphrey and Sneath, 1999: 233–64). Landwas ultimately owned by the state, use was managed by the collective management andpastoral households generally had recognised areas of pasture within the areas allocatedto their group. The collectives also maintained machinery for transportation and hay-cutting services. Pastoralists were moved on the longest legs of the annual migrationby collective trucks, and hay was delivered to help feed livestock during the difficultmonths of winter and early spring. This coordination and support of pastoralism isgenerally viewed as a very positive aspect of the old system by herders, and has beensorely missed since the advent of the ‘age of the market’.

The collectives used their own accounting systems. Salaries and bonuses earned bythe negdel members were held as credit against which pastoralists could buy goods fromthe collective’s ‘mobile shops’ that toured the encampments by truck. If they neededmoney in paper currency (belen mongo – ‘ready money’), they would withdraw itfrom the financial department of their collective or state farm. This was the collectives’answer to the Chinese merchant houses barter-trade, and it was thought of as successful,since wages were relatively high and Mongolia’s integration into the COMECONtrading block brought a selection of industrial products to the pastoralist’s door. Thesemight have been considered unimpressive by Western European standards, but werenevertheless very welcome to rural Mongolians. Staples were rationed and subsidised,and since luxuries were generally in shorter supply than state salaries, personal debt didnot present itself as a significant problem, and this left its mark in oral history narrativesof the period.7

7 Informants interviewed as part of the ‘Oral History of Twentieth Century Mongolia’ project oftendescribed the collective era as one in which they did not have debts. A 43-year-old music teacherand former herder from Malai sum in Omnogov’, for example, noted that people ‘didn’t have debts,so at that time their salaries were all spent on their own living (costs) and their children’ – orshirgui ingeed tuhain uyeinhee tsaling odoo ooriinhoo am’drald ur huuhduuddee buren zartsuulaad(interview 080823A). A 67-year-old retired herder from Altanbulag remarked ‘we would buy clothesfor our children and food and drink and next month’s salary meant we never had any debt’.Huuhduuddee huvtsasyg n’ avch ogno hool undyg n’, daraagiin tsalin boltol yeroosoo or tavihgui(interview 080502A). One informant (080810A) did describe the obligation to work for the collectiveas a debt (or), but this was unusual.


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D i sman t l i n g s t a t e soc i a l i sm

In the early 1990s, in the wake of the collapse of Soviet-backed state socialism, theMongolian state undertook wholesale political and economic reform. A multi-partyelectoral system was introduced, and although the old ‘communist’ ruling party (theMongolian People’s Revolutionary Party, MPRP) was confirmed in office, the statenevertheless embraced a broadly neoliberal agenda. The government embarked on aseries of radical reforms designed to create a market economy. In common with otherSoviet-block countries, the western economic advice given to Mongolia resembledthe stabilisation and structural reform packages that the IMF and the World Bankrecommended for poor countries in the 1970s and 1980s (Nolan 1995: 75). It included theprivatisation of public assets, price liberalisation, cutting state subsidies and expenditure,currency convertibility and the rapid introduction of markets. The recommendationsreflected a neoliberal discourse in which the economy should be emancipated from thepolitical structure, permitted to assume its latent ‘natural’ form, composed of privateproperty and the market.

As Ferguson notes (2009), the term neoliberalism has a range of different meanings,from a synonym for capitalism to certain modes for the creation of subjects. Here it canserve to describe the macroeconomic doctrine, described by Harvey as advocating theliberation of

individual entrepreneurial freedoms and skills within an institutional frameworkcharacterised by strong private property rights, free markets, and free trade. Therole of the state is to create and preserve an institutional framework appropriateto such practices . . . if markets do not exist (in areas such as land, water, education,health care, social security, or environmental pollution) then they must be created,by state action if necessary. But beyond these tasks the state should not venture.State interventions in markets (once created) must be kept to a bare minimum.(2005: 2)8

The programme to privatise collective and state enterprises began in 1991. In ruraldistricts the reforms included the dissolution of the pastoral collectives (negdel) andmost of the state farms (sangiin aj ahui). The collective herds of sheep, goats, cattle,horses and in some regions camels were divided between the former members, as werethe other collective assets, such as motor vehicles, machinery and equipment.

The introduction of the new property regime had the effect of breaking up theconcentrated herd ownership, the large-scale movement systems and specialist supportoperations the collectives had organised. Many of the workers in the rural settlementslost their jobs but gained some livestock instead. A quarter of a million former collectiveand state workers became directly dependent on small holdings of livestock. This trebledthe number of workers directly reliant on pastoralism for their livelihood from lessthan 18% of the national workforce in 1989 to 50% of the working population in 1998.Livestock numbers began to rise. Pastoralists valued herd-wealth in its own right andnow relied upon their domestic animals for subsistence, so increasing herd size became

8 As a political position this generally entails, as Ferguson puts it, ‘a valorization of private enterpriseand suspicion of the state, along with what is sometimes called “free-market fetishism” and theadvocacy of tariff elimination, currency deregulation, and the deployment of “enterprise models”that would allow the state itself to be “run like a business”’ (2009: 170).



a matter of food security. From 1990 to 1998 the national herd increased by over 20% tonearly 32 million head. However, the efficiency of pastoralism declined.9 The exports oflivestock and livestock products collapsed; incomes, public services and living standardsdeclined dramatically (World Bank 1994: 19; Griffin 1995: viii). The number of peopleliving below the poverty line increased from almost zero in 1989 to over 33% in 1998(United Nations Systems in Mongolia 1999: 5). Pastoralism began to fail to providebasic food security for a growing number of households, and a steady flow of peoplemoved into the semi- and informal economies of peri-urban peripheries, particularlythe vast city of yurts and shacks around Ulaanbaatar, the geriin horoolol.

D i s t r i b u t i o n o f l i a b i l i t i e s

As Verdery argues (2004: 140), new proprietary regimes can be analysed in terms ofthe distribution of liabilities, rather than simply goods and assets. In this case the newproperty rights became stakes in wider systems that included objects, resources andthe organisation of labour. This also brought a share in the risk that this networkmight collapse or operate unsuccessfully, and the new pastoral sector was extremelyvulnerable to bad weather. This was made tragically clear in the winters of 1999 to2001 when Mongolia lost some 6 million livestock, a fifth of the national total. Thesezuds (disasters caused by severe weather) were the result of an unusually dry summerfollowed by a savagely cold winter. Losses were concentrated in some regions – oneprovince, Dundgov’, was particularly badly affected, losing more than a quarter of itslivestock. Across the country some 2,000 households were left without any livestock atall after the first winter, and many more were left with unsustainably small herds. Sincethen major livestock loss from gan (drought) and zud has become an endemic featureof the pastoral sector. The zud of 2010 was one of the most severe, causing the loss ofmore than 8 million livestock (UNDP 2010: 1).

Although zuds are the result of unexpectedly harsh conditions, these crises wereentirely predictable. Severe weather of this sort occurs periodically in Mongolia, anda number of measures had been developed to mitigate its effects. Mobility was animportant technique; herds were moved from the most badly affected localities toareas where conditions were better. This could be done rapidly in the collective era asmanagers could use teams of trucks and coordinate movements centrally. The collectivesand state farms also stockpiled hay, which could be used to provide extra fodder forexhausted animals, and this also relied upon the motor pools for distribution to pastoralencampments.

The livestock losses themselves are in fact less important than their differentialeffects on the livelihoods of pastoral households. Some herds were wiped out entirely,and the poorest households had so few livestock to begin with that they were vulnerableto any sort of loss. In the collective era even these dramatic levels of livestock loss, shouldthey have somehow occurred, would not have threatened the basic food security ofpastoralists; total livestock numbers always recovered and collectives were restockedfrom other districts. Risk, as well as property, had been centralised – firstly by the

9 By 1998 survival rates of offspring had fallen by around 10%, and livestock totals were only able torise because levels of marketing and consumption declined by about 20% (NSO 1999: 83–4).


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negdel and secondly by the state itself, which ultimately underwrote the collective’soperation.

But the tiny, independent pastoral producers that have been created by theprivatisation of pastoralism now face destitution if their livestock die. Half theMongolian population had become directly dependent on their own herds forsubsistence in a massive distribution of risk. In retrospect we might say that thecentralisation of the planned economy exposed pastoralists to another sort of risk –the possibility that the system itself might collapse. But in the collective period thissort of systemic risk had been largely invisible. The experience for most pastoralistsin the 1990s was one of a sudden and dramatic rise in insecurity. The Mongoliangovernment, made acutely aware of this by recent events, has begun to develop systemsfor spreading risk that are compatible with the neoliberal economic reforms. In March2001 the government began debating a new Livestock Insurance Law in the hope ofreducing the risks to pastoral producers. However, the result was that the World Banklaunched a livestock insurance programme with the aim of combining the insuranceproducts of commercial companies with a government-financed safety net, and this hasled to a pilot scheme that was begun in three provinces in 2006 (Mahul and Skees 2006).It remains to be seen if this will have a positive effect, but there is considerable publicscepticism about its prospects.

Along with the new political economy came a new citizenship regime in whichthe associated neoliberal ‘arts of government’ are also in play.10 The pastoralist hasbeen pressed to become the ‘responsibilised’ citizen that Ferguson describes, supposedto be operating as a miniature firm, ‘responding to incentives, rationally assessingrisks, and prudently choosing from among different courses of action’ (2009: 172).Much of this comes from the transnational politics of the World Bank and otherdevelopment agencies whose offers of funding are generally irresistible to domesticMongolian politicians, but whose formulation of the problem and proposed solutionsreflect neoliberal doctrine. The overall result of macroeconomic reform has been theintroduction of market mechanisms into new areas of social relations. In this case it hasbeen extended to include access to another scarce resource – timely money.11

The new r eg ime o f deb t

Debt has become such a very common condition in rural (and urban) Mongolia that tobe free of it is something of a dream. As the saying goes ogloo bosod orgui baihshig saihanzuil ugui – ‘nothing is so beautiful as waking up in the morning free of debt’. Baatsagaan

10 Ferguson’s analytical distinction between the ideological project of neoliberalism on the one handand neoliberal ‘arts of government’ on the other (2009: 166) is helpful in this case since Mongolianpolitical culture is diverse and as a political doctrine neoliberalism still has to contend with elementsof reformed socialism. However, when it comes to the mechanisms of the ‘post-socialist’ politicaleconomy introduced since the 1990s, Mongolia can certainly be said to have entered an era ofneoliberalism.

11 The expansion of commercial credit could be seen as a mechanism of neoliberal rationalisationin that it represents an ostensibly transparent market for timely money, just as in his study ofthe industrial city of Belaya Kalitva, Collier describes state budgets as ‘technological mechanismsthrough which neoliberalism seeks to rationalise and reengineer the institutions of Soviet socialmodernity’ (2005: 373).



sum, for example, is a rural district in the province of Bayanhongor aimag, some 700 kmsouthwest of the Mongolian capital Ulaanbaatar. In 1991, after the dissolution of thedistrict’s collective farm (negdel),12 a short-lived marketing cooperative was foundednamed Tsagaan Eej.13 Cooperatives of this type (horshoo) were established all over thecountry at this time in an attempt to bridge the gap between the new rural producersand the markets. These cooperatives typically took bank loans for start-up costs suchas trucks to move the produce to market, and almost all went bankrupt in the mid-1990s in the face of spiralling interest rates and rising prices for costs such as fuel. Sincethen pastoral households have engaged directly in the market as atomised individualproducers. The most successful of these have over a thousand head of livestock, but thereare only a handful of such wealthy households. Most middle-income households have afew hundred sheep and goats and smaller numbers of larger animals, typically betweenten and thirty cattle and horses. Poor households have fewer livestock, often just a fewdozen sheep and goats, and some work herding the animals of richer households.

Formal debt (or) was rare in the collective period, but ‘borrowing’ (zeel), however,was very usual. People would routinely lend goods to family and friends within theirnetworks. Forms of pooling goods and labour were also very common. Productionbrigades (brigad) frequently undertook jobs that one of the member households neededdoing on a rotational basis, such as sawing logs or repairing enclosures. This might bedone as often as once a week, with each household benefiting in turn. Brigades wouldalso often find ways of making extra, informal, income, by using scrap materials tomake fencing, for example, and selling it. This money was usually put into a jointfund (dundyn san), often in a bank account with the brigade head and accountant assignatories, and was spent from time to time for weddings, funerals and other expensesas agreed at brigade meetings.

From being virtually unknown in the collective period, debt is now ubiquitous.In rural districts most shops sell goods to customers on informal credit, particularlyif they know and trust them. With the local economy fuelled in this way by credit invarious forms, creditworthiness becomes of critical importance for households. Trustis generally sufficient for the members of networks, including shopkeepers. However,banks have more formal methods of producing security, and the result is a process ofcollateralisation by which herders’ possessions become priced without ever being on themarket. The values created in this way, however, are very low. In Baatsagaan in 2011 asheep was typically valued at 15,000 MNT (US$12), and a cow at 75,000 MNT (US$60),around a third of the market price.14 A large fully furnished yurt (ger) is valued at justUS$240 (300,000 MNT), again a fraction of the usual cost.

The banks will generally only make loans to pastoralists who can put up a certainnumber of livestock as security, typically 75 sheep and goats (bog mal ‘small animals’).With other collateral such as gers, winter shelters or vehicles, loans are generally givenup to 60% of the value of the security. Since around 30% of pastoral households havefewer than 50 head of livestock, there are many rural people who, in theory, should

12 In the state socialist period all rural districts supported a collective (negdel) or state farm (sangiinaj ahui). The Baatsagaan collective was named Choibalsangiin Zam ‘Choibalsan’s Way’ after theMongolian Premier Khorloogiin Choibalsan, Prime Minister from 1939 until his death in 1952.

13 This means ‘White Mother’ – a reference to Lake Boon Tsagaan in the district.14 Marin (forthcoming: 11) found that valuations could be much lower than this. He reports

extraordinarily low bank valuations from Dundgov’ in 2007 – just 1,350 MNT for a sheep and8,000 MNT for a cow (about US$1 and US$8 respectively – a tiny fraction of the normal price).


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not be able to get credit. But since those with the greatest need for timely money oftenlack collateral, it is common for people to take out ‘double loans’ (davhar zeel), thatis bank loans in the names of others, usually close relatives, who have better securities.Since they often find it hard to secure loans, pastoralists pay higher premiums as aresult. Interest rates of 2.8% a month were usual for loans to herders, representing anannual interest rate of around 34% a year.15 Rates as ‘low’ as 2.3% a month could becharged those with particularly good records of repayment and security, but this wasrelatively rare. Interestingly, these rates approach the 3% per month that was the usualrate of interest charged by the pre-revolutionary Chinese merchant houses, consideredblatantly exploitative by historians (Bawden 1968: 98).

All but the richest households in Baatsagaan have bank loans. Most take these outin late August and early September to pay for their children’s school fees, the costs ofrepairing wells and producing animal fodder for the winter. They aim to repay them inlate April to June with the proceeds of cashmere and wool sales. The seasonal natureof market income, then, is one source of the need for loans. The other major reason,however, is the systemic risk posed by climatic variation. Zud struck the district in2000, 2004 and 2010. In sub-district (bag) number one, for example, livestock numberstotalled 37,000 in 2003 and fell to just 8,000 after the 2004 zud. Over the following yearsthe total rose to 25,000 but fell back to 12,000 in 2010. These huge losses pressed somefamilies deeply into debt. Having lost all their livestock, one household, for example,received a loan to buy 30 sheep and goats from the World Bank restocking programmeshortly before the 2010 zud. The head of the household had hoped to build a herdof a thousand or more. Despite his making every effort to look after his livestock,he lost every single animal. Without any other prospects he joined the thousands ofMongolians who go every year to try their luck and the gruelling and dangerous workof illegal ‘ninja’ gold mining.16

The combination of zud and bank loans led to two other households in the sub-district having their collateralised herds seized and driven away. One household hadseveral adult children and had taken out loans to fund their marriages using their parents’herd as collateral. In the aftermath of the zud, the household head was unable to keepup with the repayments so that all their remaining livestock were seized by the bank.In the second case a well-respected herder in his sixties had several hundred livestockbefore the zud killed all but 60 of his sheep and goats. He had taken a bank loan theyear before to cover medical costs as a result of a motorcycle accident. Unable to keepup with the repayments on his bank loan, his entire herd was seized.

As Solongo, the sub-district governor put it, ‘If you ask why herders borrow money,it is because of these many recurring zuds; when herders livelihoods fall they borrowmoney.’ Loans, then, reflect needs, not investment opportunities. This was echoed by

15 Inflation averaged 12% from 2007 to 2012.16 The term ‘ninja’ became the standard name for these miners who hand-dig tunnels for soil that can

be panned for gold without any formal mining licences. The term appears to have come from theresemblance between the green bowls they carried on their backs and the characters in the popularTV cartoon ‘Teenage Mutant Ninja Turtles’. Ninja mining has become an important source ofsupplementary income for people of the district, particularly for those desperate for cash. Groupsof three or four friends, or sometimes relatives, travel to gold fields in Gov’-Altai province some250 km to the east. They usually buy essentials on credit from a shopkeeper who they know andend up in another cycle of debt and repayment as they come across small finds of gold from timeto time.



her friend Narantuya: ‘Someone who has a thousand livestock does not take out loans.They are not like us who have only a few livestock and worry about our livelihoods . . .

Obviously, if the livestock are really good people will not take out loans.’17

Herders also take loans to pay for vehicle hire so that they can move to freshpastures – either as part of expected seasonal movement, or to make the additionalmovements to fatten livestock when the usual pastures are insufficient (otor). The needfor movement depends upon the weather. This is true throughout Mongolia, but isparticularly the case in the more arid regions in and around the Gobi, where rainfallvariation is at it highest. Marin (forthcoming: 10), for example, has shown that inDundgov’ debts increase in harsh years and are closely linked to the need to undertakeotor.18

Neo l i b e r a l i sm and the p r om i se o f c r ed i t

In neoliberal theory – used here in Harvey’s utopian sense – credit should function tofacilitate investment in agricultural production, just as it would in industry or commerce,allowing greater productivity and eventually enhanced living standards. The extensionof agricultural credit is advocated by the World Bank and international developmentagencies as a technical requirement of rural development.

Something that resembles the neoliberal promise is materialising for some wealthierpeople. New shops and businesses have sprung up in places near large existing or futuremarkets, such as Khanbogd sum near the major new copper mine being constructed atOyu Tolgoi. Loans have allowed local entrepreneurs to invest in stock and machineryin the approved way (Tsolmon 2010: 14). Although such enterprises fail all the timeand bankruptcies remain common, the anticipated flow of new mining wealth promisesmany success stories.19 A small group of wealthy pastoralists are also in a positionto reap the benefits of investment by exploiting economies of scale and extensivesystems of pastoral movement. The wealthiest few households in most districts have

17 Solongo: ‘Yaagaad malchid zeel avdag geheer ene olon davtamjtai zud turhan bolood malchdynam’jirgaa dordohloor zeel abch baigaa yum.’ Narantuya: ‘Myangat malchin hun zeel avahgui ee.Ted nar chin’ bid nar shig tsoohon maltai am’jirgaa yaanaa gej baigaa bish. . . Mal ih saihan baivalhumuus zeel avahgui sh dee.’

18 Debt levels seem to reflect this variability. Total outstanding debt to commercial banks in Dundgov’,for example, was 11,963 million MNT in 2007 (NSO 2008: 165), which works out at just under1 million MNT (US$750) per household.

19 Some aid agencies also offer soft loans, and these may be gratefully accepted. Bold, for example,was a 78-year old former electrical engineer living in the northern province of Bulgan aimag.He had acquired 12 hectares of agricultural land but had been unable to raise the funds to buyequipment needed to farm it. Even the agricultural HAAN bank had dismissed his case on thegrounds of low security. However, in 2007 Bold got a loan of US$1,700 (2,160,000 MNT) from theinternational evangelical development organisation World Vision who offered loans to the poorwithout collateral. He marketed three tons of potatoes as a result and was required to repay onlyUS$1,000 (1,296,000 MNT). In 2011 he was given another loan in the form of a tractor and trailerworth about US$4,000 (5,200,000 MNT), again without collateral. However, although the trailerwas functional the tractor needed repairs he could not afford and had been sitting unused forseveral months. Bold was unsure if he would repay the World Vision loan; indeed he thought hemight not have to since there was no contract or collateral. But this was a very rare situation; mostborrowers dream of finding a source of financial aid with such beneficial terms.


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over 1,000 livestock, and the wealthiest few in each province have over 2,000.20 Thewealthiest owners typically employ hired herders, parcelling out livestock to otherpastoral households to herd for them. They frequently own and maintain motorvehicles, sometimes trucks, which can allow them to move further and more oftento make use of distant pastures, and to bring in fodder when they need to. This signalsthe emergence of larger-scale private herding businesses, drawing on labour and capitalto operate reasonably successfully in the terms of new economy (Sneath 2004). In someways these larger operations resemble those of the pre-revolutionary period, in that richherd-owners make use of both livestock and labour to produce surplus, but this processwould have to go much further before we saw the enormous concentrations of herdwealth found in the aristocratic era, and it is unlikely that under present conditionsthese larger-scale operations will become big enough to include the bulk of pastoralhouseholds. As yet, such wealthy pastoralists represent a small minority – in 2007less than 2% of herding households owned more than 1,000 livestock. The bulk ofthe pastoral sector continues to be composed of households with small herds. Aroundtwo-thirds of livestock-owning households own fewer than 150 domestic animals – thesort of herd-size needed to successfully make a sustainable livelihood in pastoralism.These poor pastoralists are generally the most vulnerable to shocks such as zud, and aretherefore also the most likely to need credit in times of trouble.

In what, following Collier (2005), we might call ‘actually existing neoliberalism’,most loans are used to pay for goods that are consumed (often necessities in times ofhardship); they cannot increase productivity. Pastoral families typically take loans ofbetween 500,000 and 1 million togrog for a year (approximately US$400–800). Interestpayments simply become an added drain on the household’s income. The virtuous cycleof loans allowing improved productivity and greater wealth is a minority scenario. Thegreat majority face a vicious cycle of poverty leading to debt and further poverty. Despitepositive GDP growth for over a decade, the percentage of the population estimated tolive below the poverty line has increased from 33% in 1998 to over 39% in 2010 (CIA2012).

Another driver for personal debt has been the promise of future payments.Mongolia’s economic future has increasingly become associated with the mining sectorthat came to account for between a quarter and a third of GDP (NSO 2008: 137).Multinational mining corporations showed strong interest. Rio Tinto, for example,entered protracted negotiations with the Mongolian government for the rights to exploitan enormous copper deposit in Oyu Tolgoi. Widespread fears of exploitation and heateddebate within parliament and the press slowed the process, but in 2010 Rio Tinto finallygained rights to begin mining in an agreement that allowed the Mongolian governmentto purchase up to 34% of the project. In its long campaign to win mining rights, RioTinto had predicted that the Oyu Tolgoi development would increase the GDP ofMongolia by a third, and in the 2009 election campaign both political parties began tooffer voters a direct handout from the anticipated revenue.21 As a result, since 2011 allcitizens receive a monthly income from the government of 21,000 MNT (about US$17).

20 In 1998 there were reported to be 955 pastoral households with more than 1,000 head of livestock,of whom 33 had more than 2,000 animals. By 2007 this number had trebled to 3,181 and 170respectively.

21 In 2009 the ruling MAHN party offered every citizen a handout of 70,000 MNT (around US$60),but when the rival MAN party offered to distribute more, a bidding war drove the final promiseup to 1.5 million MNT (around US$1,200).



This has provided a lifeline for poor rural households since it can go a long way towardscovering the cost of staple items such as flour.22 Banks have been quick to seize theopportunity of offering loans on the grounds that households would be able to repaythem from future government handouts, and banking credit has expanded.

Conc l u s i o n

William Sites (2000) coined the term ‘primitive globalization’ by drawing upon Marx’s(1990 [1867]) notion of primitive accumulation – the historical process by which thestate uses its power to separate producers from the land in the feudal and early modernperiod, as in the enclosure of common land in England. Sites argues that although21st-century capitalism does not require further accumulation of capital in this way,for globalisation to proceed people need to be dis-embedded from ‘conditions thatwould otherwise impede short-term economic activity’ and integrate them into globalmarkets (2000: 121), and he draws our attention to the important role of the state in thisprocess. In the neoliberal era of Mongolia, the state very rapidly accomplished ‘primitiveaccumulation’ of capital through privatisation, judging, realistically enough perhaps,that it had little choice.23 It has also gone a long way towards ‘primitive globalisation’by thrusting its citizens into global markets, both to sell what they produce and to buywhat they need. These needs now include credit. To in-debt can be to dis-embed – sinceit engages the borrower in a wider series of economic relations. With the expansion ofcredit, Mongolian pastoralists are now increasingly subject to national and internationalfinancial markets as well as the global markets for their commodities.24

Whatever else they have done, the various risks and liabilities that have beenprivatised, along with livestock, are efficient at producing the need for credit. In 2010,for example, there was an outbreak of foot and mouth disease in the eastern provincesof Dornod and Sukhbaatar. Herd owners rushed to vaccinate their herds and mosthad to take out loans to do so. In Sukhbaatar aimag over 1,500 pastoral householdstook out loans from a single bank, representing 17% of all herding households in theprovince. These loans averaged more than 1.1 million MNT (approximately US$900)each (Batzayaa 2010). With typical annual interest rates as high as 34%, this is aconsiderable debt burden for most pastoral households.25 The new regime of debt is byno means restricted to the rural economy; it is a general feature of the new Mongolia.The total level of outstanding loans owed commercial banks in Mongolia has risensteadily from just under 63 billion MNT in 1995, to 606 billion in 2005, and in 2007stood at just over 2 trillion MNT (NSO 2002: 101, 2006: 134, 2008: 165), representing a

22 In 2011 a 50-kg sack of flour cost 38,000 MNT (about US$30), for example, which is about enoughto feed a herding household for a month when supplemented by animal products.

23 Mongolia’s economy had relied upon Soviet inputs that collapsed in the 1990s. Some estimate thisamounted to as much as a third of GDP or more (e.g. United Nations Systems in Mongolia 1999:6).

24 Pastoralists have, of course, long been enmeshed in wider sets of relations; in the Soviet era as partof the national planned economy and COMECON trading bloc, and in the Qing period in thewider regime of debt and market created by Chinese trading firms.

25 This is by no means unusual. Throughout Mongolia pastoral households owed some 57 billionMNT to commercial banks in 2010, which represents an average debt of around US$400 assuming30% of pastoral households are too poor to be credit worthy.


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debt of over 3 million MNT ($US2,400) for every household, in the country where theaverage monthly wage is around US$170.

Timely money is a scarce resource. But as Verdery notes, resources are always ‘madescarce within a given system of values and power relations’ (2003: x). The extension ofcredit is generally presented as a way of helping pastoralists; the World Bank and otherdevelopment agencies are keen to promote microcredit schemes as means of combatingpoverty within the discourse of neoliberalism. Whatever the efficacy of extending creditand microfinance as a long-term means of reducing poverty, one powerful side effecthas been to expand the opportunities for capital, and to create income from liquid assets.Although advanced as a solution to the variability of income and associated risks, debtexposes households to new sorts of risks. The fluctuating fortunes of internationalfinancial markets can change the availability and interest rates on loans so as to threatenlivelihoods just as a zud or falling cashmere prices can, as many found to their cost inthe early 1990s when interest rates increased so quickly as to put many enterprises outof business. We can only hope that market failures will not coincide with environmentalshocks, since if they did Mongolian pastoralists would be facing a ‘perfect storm’ intheir struggle to provide for their families. Mongolia’s historical experience of debt is asa hugely powerful mechanism for extracting wealth from a progressively impoverishedpopulation. The challenge will be to prevent history from repeating itself.

Acknow l edgemen t s

This paper would not have been possible without an AHRC grant to support the ‘OralHistory of Twentieth Century Mongolia’ project. The author would like to thank allthose who provided help and information, particularly Munkh-Erdene, Solongo andNarantuya.

David SneathDepartment of Archaeology and AnthropologyFaculty of Human, Social and Political ScienceFree School Lane, Cambridge CB2 3RFUnited [email protected]

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