April’s issue of Harper’s Magazine has a terrific story by Daniel Brook on the new forms of usury available to the working poor in the US and Europe, although the article focuses on the US: Specifically on the check cashing businesses that ‘loan’ advances on a person’s paycheck at what are, without any doubt, excruciatingly usurious rates. These are fortnightly loans intended to be paid back by one’s next pay packet, which permits people, psychologically, to consent to paying as much as $50 on a $250 advance, even though this is an illegally high (indeed legally ‘usurious’) per annum lending rate. Interest rates can be as high as 1500% an astonishing amount. And the trick is (think about it): if you can’t get through this pay period without an advance, you’re highly unlikely to be able to pay off that loan plus 25 or 50 bucks on the next fortnight’s pay. Inevitably these loans get rolled over and over and over, which is apparently legal, if not ethical, until yes indeed, someone has paid off a $300 loan, after late fees and interest, with $4500---after successive harassing letters and perhaps even quasi-legal threats. [Pounds Till Payday, for example, is just one of several online and offshore payday loan companies---this one operates from Malta and is pitched to the UK borrower---charges an APR of 2,225 %, reports Lisa Bachelor The Observer 29 Sunday 2008.]
These customers are people who don’t retain lawyers and don’t have the time or resources to take the company to small claims court to legally determine what their allowable interest might be. More often than not, they don’t care. Sometimes the interest they’re paying on a single loan is less than a bank’s overdraft charge, so the deal looks pretty good from the start. It’s only when these loans are extended and recalibrated that the screws begin to turn. This is when the small self-styled public service operations (that paint themselves in the colours of anti-capitalism goodwill, the new face of microcredit for the masses, and so forth) become more like the usurers of First testament form, whose extortionist lending practices were listed by prophet Ezekiel as among the most “abominable things,” along with rape, murder, robbery and idolatry (Ezekiel 18:19-13). These are truly entrepreneurial forms of avarice, whether float on the internet ether as sonicpaydayland.com, mycashnow.com, Moneysupermarket.com or Moneyexpert.com, or set up small shops in the strip malls of America under signs that read Checking Cashing Inc., Check ‘n Go, Check Into Cash, or Advance America.
The really needy need not apply
You cannot really be destitute or ne’er do well to avail their services, even though they invite those with bad credit histories to apply. Their market is the working poor, those without collateral for serious bank loans, but a regular paycheck that’s covering less and less of a household’s basic needs these days, but enough to convince the earner they deserve to splurge on a birthday, a shopping spree, maybe even a pallet of beer. It makes sense that they’re always found near military bases and manufacturing plants. Where working stiffs are today’s most indentured of the hapless poor. These are the folks most effected by the predatory subprime mortgages, upon whose backs the American economy is rebuilding itself by bailing out the big banks. Some overlap also exists with the new evangelical crowd who bought the haute-capitalist ethic of money as manna, and began to worship brands as a sign of the Lord’s benevolence. Some of the makeshift cant of these doorstep lenders invoke the ideas of social and religious righteousness, of working outside the oppressive banking system, and fulfilling Martin Luther’s promise in his Poor People’s Campaign---coming to finally get their check from the Man---and carving out their own corner of prosperity theology.
Michelle Leder reports in Slate Magazine May 10, 2004 (‘How the Other Half Banks: The depressing, amazing "payday loan" business’) quotes John L. Rabenold, a spokesman for Check 'n Go, as saying, "Our customers don't think they're making a bad financial decision."
Filthy lucre at an arm’s length
But the big banks know they are. That’s why most of these lending companies are small private firms which wouldn’t be touched with a ten foot pole by Bank or America (of Westpak or ANZ). They’re so obviously usurious, so reminiscent of loan sharks chewing toothpicks, that you can almost imagine an industry of would-be Scrooges kicking themselves with envy as they publicly condemn their brazenly low-brow exploitation. Why didn’t we think of that?! As Leder goes on to say: “Perhaps that's why Wall Street is so excited about Dollar Financial, one of the remaining prizes. Dollar, based in Berwyn, Pa., a Philadelphia suburb, expects to go public sometime this summer… Wall Street is lining up to support Dollar's offering, which points to the ambivalent relationship it has with the payday-loan business. Despite the huge potential profits, retail banks have shied away from offering payday loans, because they know it would tarnish their reputation... They have the financial might to cut rates down to much lower levels, but they don't want to be seen as exploiting the poor—after all, they would still charge 10 times the interest rate on a small, short-term loan as on a large, long-term one. Yet at the same time banks avoid issuing payday loans, they happily accept the payday-loan companies as clients. Citibank won't operate a payday-loan business, but Citigroup is going to be the lead underwriter on Dollar's IPO.”
Elsewhere, Lisa Bachelor of The Observer (29 June 2008) reports that Citizens Advice in the UK has a client who approached them for help on her £8,000 debts. She’s a single mother of a ten year old, with a weekly income of £83 statutory sick pay and £200 in state benefits. “One of her debts was a payday loan, taken out online,” writes Bachelor, “with an APR of 1,355 per cent. 'Her mental health was deteriorating and her financial situation was becoming increasingly impossible,' said a Citizens Advice spokesman.”
We borrow to give
All of this interests me because the European and American media have also been reporting another trend, far more salubrious, but much less surprising. They’re telling us that poor people are more generous than the rich. Despite the astronomical trickle-down of those like Bill and Melinda Gates who soared to the top of the old capitalist order, only to give billions away as proof that reaganomics can work for the very few, it seems that statistics are telling us the era of greed really was greedy after all. Billions of philanthrocapital dollars and yen and euros later, we can still conclude that money only makes you more stingy than before. Warren Buffet may be generous, but the majority of extremely well-heeled people simply don’t give as much---proportionately---as do the poor---that’s what we’re being told. If I make $500/year growing coffee in Brazil, I am more likely to give half my income away to those needier than myself than is any multimillionaire, not to mention the many nouveau billionaires of the late 20th century.
Frank Greve writes in McClatchy Newspapers online May 19 2009 (America’s poor are its most generous) that those who have less, give more:
“When Jody Richards saw a homeless man begging outside a downtown McDonald's recently, he bought the man a cheeseburger. There's nothing unusual about that, except that Richards is homeless, too, and the 99-cent cheeseburger was an outsized chunk of the $9.50 he'd earned that day from panhandling….
“‘The lowest-income fifth (of the population) always give at more than their capacity,’ said Virginia Hodgkinson, former vice president for research at Independent Sector, a Washington-based association of major nonprofit agencies. ‘The next two-fifths give at capacity, and those above that are capable of giving two or three times more than they give.’
“Indeed, the U.S. Bureau of Labor Statistics' latest survey of consumer expenditure found that the poorest fifth of America's households contributed an average of 4.3 percent of their incomes to charitable organizations in 2007. The richest fifth gave at less than half that rate, 2.1 percent. The figures probably undercount remittances by legal and illegal immigrants to family and friends back home, a multibillion-dollar outlay to which the poor contribute disproportionally. None of the middle fifths of America's households, in contrast, gave away as much as 3 percent of their incomes.”
One informant, Tanya Davis, a 40 year old laid-off security guard and single mother, seemed to hit the nail on the head when she told Greve: ’As a rule, people who have money don't know people in need.’ Rich people don’t live in needy contexts. Cash-poor people are constantly being hit up. But even if you turn to the Pacific, where lunch grows on the trees and people are only precariously launched into a cash economy (and remain very dependent still on gardens and jungles and the sea), you find more material generosity than you might expect, and it doesn’t confirm to a needy-not-needy formula. Needy people give, less needy people give, and the rich make great displays of generosity in order to place others in their debt. The answer is that the western capitalist model is just culturally different from the non-western one, even that which is partially capitalist.
We borrow to go to Harvard Business School to pledge our integrity
But again, we live to be surprised. Another line of news is reporting on business school students in the States who are pledging to be different, to cut the chord with the me generation past and represent a new era of capitalism with integrity. Jacob Ganz of National Public Radio online (May 31 2009) reports that:
“It seems that a group of MBA candidates at Harvard Business School, surveying the wasteland that that has been made of their soon-to-be profession, have decided that new business managers should hold themselves accountable to something more than insane short-term growth and ridiculous bonuses. “
And so, this month, the MBA Oath was born. It's sort of ‘a management equivalent of the Hippocratic Oath,’ writes Max Anderson, a 2009 HBS grad, on the website… “The oath is strictly voluntary, but so far it's been signed by over 100 recent HBS grads, plus a handful of new MBAs from other institutions around the country.
The short version of the oath [is]:
As a manager, my purpose is to serve the greater good by bringing together people and resources to create value that no single individual can build alone. Therefore I will seek a course that enhances the value my enterprise can create for society over the long term. I recognize that my decisions can have far-reaching consequences that affect the well-being of individuals inside and outside my enterprise, today and in the future. As I reconcile the interests of different constituencies, I will face difficult choices.
Therefore, I promise:
--I will act with utmost integrity and pursue my work in an ethical manner.
--I will safeguard the interests of my shareholders, co-workers, customers, and the society in which we operate.
--I will manage my enterprise in good faith, guarding against decisions and behavior that advance my own narrow ambitions but harm the enterprise and the societies it serves.
--I will understand and uphold, both in letter and in spirit, the laws and contracts governing my own conduct and that of my enterprise.
--I will take responsibility for my actions, and will represent the performance and risks of my enterprise accurately and honestly.
--I will develop both myself and other managers under my supervision so that the profession continues to grow and contribute to the well-being of society.
--I will strive to create sustainable economic, social, and environmental prosperity worldwide.
--I will be accountable to my peers and they will be accountable to me for living by this oath.
This oath I make freely, and upon my honor.
This has got to really piss of their parents, the brokers and financiers who were fleeced in the economic crisis and now carry near-usurious loans to send their kids to HBS.
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