In America we abolished debtor’s prison. In America we allow bankruptcy. In America we abolished slavery and indentured servitude. In America we have realized that it is a social good to not allow the capital classes to forever bond a man to his debt in such a way that his life is a prison.
All, of course, except student loans, the one debt that cannot legally be forgiven. There is currently over $1.2 trillion of student debt. This is akin to the housing bubble of 2008. It cannot be repaid. It won’t be repaid. America is going to have to figure out what to do with it. What it will eventually do is tax everyone to pay it back, but in the meantime millions of lives will be destroyed.
This is not to mention medical debt which is doing the same.
I am increasingly concerned about the manner in which universities are serve as gateway drugs to a life of debt. The reason tuition is so high is the ease with which money is made available for student loans. The university can continue to increase its charges while the US government encourages the increase by easy loans. Without these loans, of course, universities would have to decrease their costs and their charges. The argument is that in this kind of situation the have-nots would have to forego a college degree. But the overall social costs of life crushing debt is the greater societal burden.
What to do? Rolling Jubilee has some kind of answer. This movement buys uncollected debt on the secondary market, which is pennies on the dollar, and forgives it. The monies come from donors like you and me. Their priority is to buy medical debt, which has the moral ascendancy on any scale of moral good. But the same idea can be applied across the board. One of the personalities involved is New York University professor Andrew Ross. He is interviews on BookTV here. He is the author of Creditocracy: And the Case for Debt Refusal.
Debt has exponentially increased since the early 1970s when wages topped out and it would take credit just to maintain the purchase of necessary goods. Now credit has become a way of life. And the credit industry has capitalized on this. It’a another version of the mortgage scams that catered to the consumer’s worse instincts and swam in the waters of fine print.
The early American suspicion of banks and capital markets has proven valid. Thomas Jefferson resisted a national bank. Alexander Hamilton won that argument. The reality is that our entrepreneurial economy needs loaned cash to do what it envisions. This is why the invention of money as a medium for the exchange of goods was so transformative and making money off lending money so necessary for our way of life. I think Hamilton won that argument fairly. But Jefferson was sensitive to the possibility of a new kind of slavery.
It is always necessary to say to consumers “don’t borrow,” and to say it a thousand times in a thousand different ways. This is the only fail safe road to life without debt. However, this is not the only work to be done. We must deal with a credit industry that encourages bad debt.
Bono’s One Campaign has recognized that the African continent is so indebted to the Western capital markets that it will never be able to pay off their loans. Never. Until that debt is paid, the West will call the economic shots and African countries will not be self-determining. We should have a version of that here for “street guy” who has now become a slave to the credit industry and will not be able to go free, ever, if the credit industry has its way.