Sunday, December 28, 2008

The Ethics of Usury

"Debt, n. An ingenious substitute for the chain and whip of the slavedriver." ~ Ambrose Bierce

The word usury comes from a Latin word meaning "interest" or "excessive interest", and originally mean the charging of interest on loans. Two dictionary definitions that pretty much give shape to the concept are these:

2: the lending of money with an interest charge for its use ; especially : the lending of money at exorbitant interest rates

3: an unconscionable or exorbitant rate or amount of interest ; specifically : interest in excess of a legal rate charged to a borrower for the use of money

On Wednesday, our paper picked up an L.A. Times story titled, "Student loans turn into crushing burden for unwary borrowers." It begins by telling the story of Natalie Hickey who graduated Brooks Institute with $140,000 in student loans. Some of these were at an 18% inyterest rate, which feels outrageous to me. Her monthly payments are currently 1700 dollars on the interest alone.

Another story is titled "Families losing appetite for college debt" and the Badger Herald highlights the issue with this story, "Why college debt hurts generation."

Over the past fifty years there has been this major push to get kids into college. Was it because the kids all needed college? Or was it because when the Baby Boomers were in college during the Sixties, they built too many dorms and schools?

Everything has value, but exactly how much value is often difficult to define. The cost of college has risen 439% since 1982, but has the value of a college education risen by 400%? All these kids get told that in order to compete in the modern world, they need college. The banking industry obviously steps in an sees all these young people as a source of ready revenue. They are young, inexperienced, easily enticed by the prospects of easy money to help get that essential degree. They do not understand the heavy burden debt and interest on debt can become.

There's another surprise waiting for this debt-laden generation now entering the workforce. Multinational corporations are now outsourcing white collar jobs to India. By 2015, according to Robyn Meredith in her insightful study of the rise of India and China, The Elephant and the Dragon, more than 3 million white collar jobs will have been exported. Programmers and positions that once garnered six figure incomes are being swept overseas, leaving service sector jobs in their wake.

In short, young people have imbibed a false gospel, never questioning the message because their parents were likewise mesmerized by its apparent validity.

In order to help them solve the Watergate scandal, Deep Throat encouraged Woodward & Bernstein to "follow the money." Let's see where the money goes in this instance. To colleges and universities. And all that interest, where does it go? Lending institutions. And where does it come from?

Please understand, this is not an attempt to denigrate the value of a college education. It is only a challenge to the ethic of loaning money to people who do not fully understand the compact they are getting into. Until you are free from debt, you are not free to come and go as you please.

Similar unconscionable lending is occuring now in Third World countries where people are being given loans at twenty and thirty percent interest, without ever having had training in what interest rates mean. It is essentially a suckerpunch to those who are already economically on the ropes. What looks like easy money ends up being a ball and chain.

Ben Franklin called debt a vice, Disraeli called it the mother of folly and crime. But our modern era wants us to believe this is a perfectly normal way of life. I'm not really sure what I think of that.


LEWagner said...

There are loan sharks over here, too.
I sometimes wonder if they walk on two legs, or on four.
I've never had the desire to suck human marrow, myself, but I guess some do.

ENNYMAN said...

Ya... and unfortunately the exist in all walks of life.