First, we removed the possibility of creating real, binding contracts by allowing employers to bust the unions that had been entering into these agreements for millions of people. Second, we allowed those same employers to cancel existing contracts, virtually at will, by transferring liability from one corporate shell to another, or letting a subsidiary go into Chapter 11 and then moving to “cancel” the contract rights, including lifetime health benefits and pensions. As one company after another “reorganized” in Chapter 11 to shed contract rights, working people learned that it was not rational to count on those rights and guarantees, or even to think in these future-oriented ways. No wonder people in our country began to live for the moment and take out loans and start running up debts.
And then we dismantled the most ancient of human laws, the law against usury, which had existed in some form in every civilization from the time of the Babylonian Empire to the end of Jimmy Carter’s term, and which had been so taken for granted that no one ever even mentioned it to us in law school. That’s when we found out what happens when an advanced industrial economy tries to function with no cap at all on interest rates.
Here’s what happens: the financial sector bloats up. With no law capping interest, the evil is not only that bans prey on the poor (they have always done so) but that capital gushes out of manufacturing and into banking. When banks get 29 percent to 30 percent on credit cards, and 500 or more percent on payday loans, capital flees from honest pursuits, like auto manufacturing. Sure, GM is awful. Sure, it doesn’t innovate. But the peope who could have saved GM and Ford went off to work at AIG, or Merrill Lynch, or even Goldman Sachs. All of this used to be so obvious as not to merit comment. What is history, really, but a turf war between manufacturing, abor, and the banks? In the United States, we shrank manufacturing. We got rid of labor. Now it’s just the banks.
Which is why the middle class is shrinking. Basically, we’re all waiters now; we’re bowing and scraping and working for the banks. Look closely at any American, and it’s even odds that he or she, directly or indirectly, is somehow employed by the “financial services sector,” which covers insurance and real estate and financial instruments of any kind. As brokers, lawyers, loan collectors, loan consolidators, secretaries at big investment firms, chauffeurs of private limousines, or even the high-tech types who exist solely to service banks–all of us, millions of us, are part of it, living off it i some way, as three generations ago we lived off manufacturing.
One could take the author to task for calling the US a debtor’s prison when personal bankruptcy is easier here than in Europe or Asia, and was even easier a few years ago; the breaking of contracts he bemoans on the part of Industry has its counterpart in the proletariate [we're Welshers one and all]. He also could have helped sell his case if he knew the Bible better; it was a clear misstep to hurl the Golden Rule against bailed-out banks’ issuing of foreclosure when the parable of the forgiving master is the correct citation. But a point-by-point analysis is beside the point. This thesis, that the collapse of usury laws set into motion the cannibalization of the US economy by its heretofore backwaters financial sector, is the narrative that will be settled upon when the history of our current crisis is written, once the over-exposure of this guy blows over.
