Saturday, January 3, 2009

Modern Day Slavery, or Debt Slavery

Consumer debt can be a form of slavery!


When I discuss Modern Day Slavery, or Debt Slavery, some people freak out, or even say such talk is racist, or some such nonsense. In reality, Slavery has existed for millennia. In the old days of Leviticus and such, slaves were not necessarily Black, but merely folks, who, for one reason or another, found themselves indentured. Typically, invading armies would enslave foes, usually people they deemed to be of lesser intelligence and value.

It was only until the 18th Century that Slavery became associated as a Black-only thing. But the roots remained the same - a view by the slave-masters that they were superior to the enslaved.  And even then, the enslavement of Africans was a follow-on to the practice of indentured servitude, which was promulgated in the New World.  Once the settlers in the New World ran out of indentured servants, taking Africans as slaves seemed like a natural next step.  Debt-slavery conditioned people to accept actual slavery - which is troubling, given the conditions in the world today.

Even today, slavery exists in the world, albeit in a much smaller scale. Oppressed people are coerced into slave-like conditions. The traffic in human misery continues, as women are forced into prostitution, or the poor are kept as virtual hostages as housekeepers and servants in some countries - sometimes even in the US!

But that is not what I am talking about here. While those types of modern-day slavery exist and are deplorable, they are not as common as what might be called Debt Slavery - the de facto condition of servitude that many in this country (and others) find themselves in as the result of economic conditions and consumer debt.  While Debt Slavery is certainly not on the level of the traffic in human flesh, it can be debilitating and devastating to its victims. And since it is far, far more widespread, one could argue that Debt Slavery is a greater harm overall.

The conundrum of Debt Slavery is that most victims willing fall into it, through their own actions and by yielding to easily-offered temptation. And like traditional slavery, it disproportionally affects minorities, the poor, and the less educated. However, even white, middle-class folks can end up selling their souls to "the man".


What is Debt Slavery?

In England in the 1700's, one could literally fall into a real form of Debt Slavery. If one failed to pay the bills and went bankrupt, not only would you lose all your worldly possessions, one could be forced into the workhouse or jail (debtor's prison) until the debt was considered "paid" or a prison sentence served. Like in antebellum slavery, children were often separated from their parents (as in Dickens' Oliver Twist) and literally sold.

Reforms brought about in part by stories like Dickens' have made bankruptcy less harsh. We no longer throw debtors into prison or take them to the workhouse. However, even a lavish prison is still a prison, and many folks in modern America find themselves in perpetual debt. If real slavery were legalized tomorrow, within a few years, a staggering proportion of Americans would end up as slaves, all because of the inability to control spending. People would literally sell themselves into bondage, all for a wall-screen TeeVee.

Debt Slavery might be defined as a condition of perpetual debt, which in turn forces a person to perpetually work in order to pay off this perpetual debt. It is a condition in which a large percentage of a person's labor (one third or more) is devoted to servicing debt - most of which is payment of interest on debt. A person in Debt Slavery never gets ahead, since as soon as one debt is paid off, another is incurred. A person in Debt Slavery never owns anything, they only owe.

And while reforms since Dickens' time have made the poorhouse and the debtor's prison things of the past, recent "reforms" to bankruptcy laws have made it nearly impossible to get out from some debts, particularly student loan debts.  The old days, where debts were "wiped clean" are largely past.  And as a result, we have created a nation of perpetual debtors, who are forever trying to "work out" their past debts, never to get ahead.


How Do People Become Debt Slaves?

One of the most puzzling thing about Debt Slavery is that most, if not all, people who fall victim to this condition willingly sign up for it. In exchange for shiny consumer goods (cars, boats, televisions, clothes, etc.) they sign their lives away, so that they can have it all "now" rather than later. Often this means paying two, three, or four times as much for an article than its actual retail price.

So, for example, a person buys a brand new car, signing up for three or four years of car payments. With interest, they easily pay 1-1/2 times the retail price of the car. Compared to the same car purchased used, they pay double the value of the car. Throw in the added cost of collision insurance over the life of the loan, and (for young people in particular) they can end up paying four or five times the value of the car.

They signed up for this to satisfy the need of the ego to have something new and shiny - and because of weakness - the inability to say "no" to a persuasive salesman. It also is a result of ignorance, or lack of experience or training. Car salesmen and dealers are not going to point out the economic folly of such a transaction. And yet the victim sees all his peers doing the same thing, so he thinks, "This must be an OK deal, right?" Wrong, of course.

Once the process starts, it worsens. Paying too much for one item, like a car, leaves the victim with less money to spend on other essentials, such as car maintenance. When the car is finally "paid for" (or even before) it is in such bad shape that the victim goes back to the dealer to "trade in" - often on onerous terms. Since the car may be worth less than the balance of the loan, sometimes the "negative equity" is folded into a new loan. As the creditworthiness of a Debt Slave is always suspect, and the balance on the loan exceeds the value of the new car, the terms of the loan (interest rate) are staggering.

But the debt slave, seeing only a monthly payment and a shiny new car, signs the papers and kids themselves they are "ahead" of their neighbor who owns and older, paid-for car.

The car scenario is only one major example, and an example of how debt can snowball out of control. Granted, most people don't end up being scammed as badly as in my example above. But that example is based on the real-world experiences of a friend of mine, so I can say that it does happen.


How Do People Remain Debt Slaves?

Once people get into Debt Slavery, it is very, very difficult to get out. Institutions cater to the Debt Slave and continually entice them to staying in its grasp. Once a credit rating is shot, only the worst sort of financing is available to the Debt Slave - interest rates of 20-30% or more.

Catering to the "I have to have it NOW" mentality, enterprises such as Rent-To-Own furniture and appliances sell consumer goods to the Debt Slave for 2-3 times their real market value. A recent trend and extension of this concept is the Rent-To-Own Rims (car wheels) that enslave their victims in exchange for what is literally bright shiny and cheaply made trinkets. The Manhattan Indians were tricked in a similar manner, swapping the Island of Manhattan for $24 worth of beads and trinkets. In the cities today, young men do the same thing for cheap Korean-made "bling" rims.

Of course, once the process starts, the Debt Slave is short of money. Financing companies fill in the gap by providing payday loans, often at interest rates of 300% or more. Each payday loan is folded over into another loan, and never paid off. Tom Wolfe wrote about this practice back in the 1930's in Look Homeward Angel, in which an unscrupulous local lawyer would loan $20 to the poor, having them pay it back in $1 weekly installments perpetually - to cover only the interest. Once trapped like this, the victims never paid the loan back. In over 70 years, not much has changed.

Pawn Shops, Car Title Loan shops, and other enterprises separate the Debt Slave from the meager consumer goods that they have managed to pay off. For pennies on the dollar, they sell off what little they have in exchange for getting money NOW.

Even if the Debt Slave manages to get ahead somewhat in payments, or gets a raise or promotion, they often fall back into slavery by buying yet another new car or purchase.

Credit Cards merit special mention. Credit Card companies have been very aggressive in recruiting new customers, oftentimes customers they know cannot pay off large debts. They offer large credit lines, knowing that the victims will indulge themselves with purchases of food, clothing, and other consumer items. Once they reach their limit, they will be charged over-limit fees and the like. Since the Debt Slave cannot manage their finances, they may pay a card late, which in turn jacks the interest rates to 20-30% or more, making paying off the debt nearly impossible.

And the Credit Card companies have successfully lobbied to pass new laws limiting a debtor's rights in bankruptcy. The one weapon that debtors had in the past has been severely blunted.


Why Do People Remain Debt Slaves?


Peer Pressure is one reason many people remain in Debt Slavery. By this I do not mean the type of pressure to conform faced by high school students. Rather, I mean the tendency of human beings to judge their own actions by the actions of others. If a suburbanite sees that his neighbor is in debt, but has a new car and other desirable consumer goods, then he/she thinks that such indebtedness is a "normal" part of modern life.

Unfortunately, we, as humans, tend to judge our actions this way - by what our peers are doing. And this negative tendency can explain some of the most egregious human behavior. If all your neighbors join the Nazi party, then it certainly doesn't seem like such a bad thing. Germans were not being particularly evil, they were just being particularly human. The scary lesson here is that any behavior can be adopted on a mass-scale, once people view it as a "norm".

Or take cigarette smoking - and the campaigns against it. When everyone smoked, the idea of lighting dozens of small, hand-held fires in an aircraft surrounded by aviation fuel seemed "normal". Today, the "norm" is to be anti-smoking, so smokers can be ostracized. Homophobia worked the same way. Today, homosexuality is accepted as part of the "norm", but in the not-too-distant past, it was not. What is viewed as a "norm" in society can change, and change very rapidly.

For this reason, the Debt Slavery industry does not want to change what is perceived as normative. Here in Georgia, for example, laws were passed outlawing payday loans. The payday loan industry has fought this, arguing that they are a legitimate business, and that in certain instances, people need such loans to get by - and that the government should not interfere in what is, essentially, a private transaction. Usury laws and the like were also repealed on similar grounds.

The Debt Industry advertises heavily. You probably know the catch-phrases and jingles of most major credit card companies ("What's in YOUR wallet?"). Payday loan places, Rent-to-Own furniture stores, and the like, all heavily advertise on Radio and TeeVee. Unscrupulous home refinancing deals also advertise heavily, offering the Debt Slave a "way out" - but one paved with toxic ARMS, junk fees, and loan points.

For many people, however, the TeeVee is the source of their normative cues. Most Americans watch 6-8 hours a day, believe it or not. They wake up to the TeeVee, watch it at a restaurant during lunch, turn it on after work, and shut it off before they go to bed. The TeeVee is the ultimate propaganda machine, and if you keep watching it, you will end up brainwashed, no matter what. The best thing to do, is turn it off entirely.

So long as Debt Slavery can be viewed as a "norm," it will continue. The best thing you can do is stop taking your normative cues from television and your dimwitted neighbors, and learn to think for yourself.

One interesting aspect of Debt Slavery is that on many blogsites and other discussion boards, you will see postings from people who actually defend bad financial decisions that lead to Debt Slavery.  While some of these postings are no doubt shilling from the debt industry, others appear to be from genuine individuals who want to self-justify their own bad behavior, by convincing themselves that leasing a brand new car every three years or running up debt on an "   airline miles"   card really isn't such a bad thing after all.


So Why is Debt Slavery a Bad Thing?

Some might argue that Debt Slavery affects only its victims. And by being in debt, the victims of Debt Slavery have a motivation to go to work every day, and thus it encourages productivity from the masses. Debt Slavery results in a massive transfer of wealth from the people in our society who can afford it least, to a small minority of people and institutions who need it least.

But just as secondhand smoke affects non-smokers, Debt Slavery harms society as a whole, not just its immediate victims. Debt Slavery creates a permanent underclass in our society, an underclass that feels it has been lied to and taken advantage of. The Debt Slave tends to believe, with good reason, that the system is fixed and the game is rigged - that there is no legitimate way to win.

And with " reforms"  in bankruptcy laws, the debt industry has been emboldened to lend money more and more to people they know in advance cannot pay it back.  They count on "workouts" and other means of getting their money back, plus copious interest payments.  By the time most Debt Slaves think about bankruptcy, they have paid for their credit card purchases at least twice over, with interest charges.  Any workout money is a pure bonus for the debt industry.  Compare this to the old days, when banks and credit card companies were reluctant to loan money to people they knew would default - as there was a real risk of not being paid back!

Creating a permanent disgruntled underclass degrades our entire society, not just the underclass it affects. Once a person comes to believe, either from personal experience or by watching the experiences of others, that they cannot get ahead legitimately, then criminal activity seems all the more legitimate. The next time you are robbed or your car stolen, ask yourself if the motivation of the robber or thief was pure laziness or merely a sound economic decision based on the perceived choices available to them.

The wealthy have far more to lose by creating a permanent underclass than does the underclass itself.


How do You Avoid Debt Slavery?

The key here is to redefine your normative cues. This can be difficult in a city or suburb, or even in the country (Many a farmer has gone bankrupt buying the latest and largest tractor, just because his neighbor has one). Bucking the norm will open you up to ridicule and abuse. But life at the center of the herd is never the richest. Most of the grazing grass at the center of the heard has been eaten down, trampled and pooped upon. The edge of the herd is dangerous, to be sure, but that's where the prime grazing is.

If you buy a secondhand car and then keep it for 10 years, you can be sure that a shallow neighbor will rib you about having an "old car". This is to be expected, particularly if the neighbor has a shiny new car and a string of car payments (or worse, lease payments). You are challenging their norm, and it scares them. They want to reassure themselves that being in debt is good, and that you are the one who is wrong.

In other cultures, it may be different cues. In Gay communities in major cities, many young men bankrupt themselves trying to appease a mythical "norm" which involves spending enormous amounts of money (all on credit) on clothes, bars, and oftentimes, drugs. Those who challenge such norms will be ridiculed for not having "stylish" clothes and $200 haircuts.

The list goes on and on. Regardless of whether you live on a 1,000 acre farm, an Army barracks, a tract home, or a school dorm, you will be pressured to get involved in many forms of self-destructive economic behavior. It takes strength and resolve to fight these trends and have your own ideas - and follow through with them. Once you have that resolve the rest is easy.

The procedural techniques of what you need to do to get out of debt and stay out of debt are well-known and obvious, and can be summed up in one simple statement: spend less than you make. That is not the hard part. Like a diet, the hard part is willpower.

It is also a good idea to understand the politics of Debt Slavery. Payday loan operators spend a lot of money supporting candidates who want preserve their line of work. Credit Card companies pay lobbyists millions of dollars to get Congressmen to pass laws in their favor. If you vote for such politicians based on their position on "social issues," for example, but fail to recognize the real dangers to yourself and society, then it is you, not the slave-masters, who are to blame.

Debt Slavery is deadly serious, and nothing to take lightly.  And anyone can fall victim to it, without thinking.  If you follow the herd and take your cues from the television, chances are you are on your way to becoming a debt slave, if you are not already one.

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