Saturday, December 17, 2022

Securitizing Debt Slavery

Up for auction today is Debbie!

Debt slavery is not a new thing.  Slavery in the United States started out as debt-slavery or indentured servitude.  You paid for your "passage" to the "New World" by agreeing to be a servant for a landowner there.  Once you worked off your debt to your new master, you were "free" but of course, there were ways you could incur new debt along the way, if you were not careful.

The number of indentured servants wasn't sufficient to establish the agrarian economy in the South, and before long, the settlers in the "New World" resorted to actual slavery.  I would be interested to read about how that came about.  Who was the first guy in America to actually own a slave?  And how did his neighbors react - recoiling in horror or drooling with envy?

So we fought the bloodiest war in our history - against one another - over this issue and eventually slavery was abolished, at least in the literal sense.  Some folks want to revisit this issue or start another civil war, over far more trivial issues.  Say what you want, the Civil War was at least about something important, something worth dying for - the idea that all men should be free.  Some folks want to start a Civil War again, over drag shows.  I just don't get it.

But I digress.

It didn't take long for someone to figure out that you can keep people in a position of perpetual servitude using debt.   For even middle-class Americans, life is a series of debts to be paid off, over time.  Even in the "Good Old Days" of post-war America, your average working Joe would spend his working years paying off a mortgage on his house and making a never-ending stream of car payments and consumer loan payments.  But at least when he retired, he might be debt-free and have a pension that paid an adequate, but not necessarily handsome, amount of money to live on.  It wasn't an utterly raw deal.

But that life-long debt meant that people had to get jobs and go to work to stay afloat.  And this meant they had to be subservient to bosses and company owners who controlled their lives.   You played by the rules and the company took care of youYou broke the rules, you'd end up broke.

That started to change in the 1970's with the various oil crises, stagflation, and the new investor economy.  Now, not only did a working Joe have to pay down his debts over a lifetime of work, he had to save up for his retirement via a 401(k) or IRA - the latter of which had such paltry limits as to be ineffective as a retirement savings vehicle.

A lot of young people today look at this whole system and scratch their heads.  "You mean I have to work for 30-40 years just to exist?"  Part of this problem is that they were indulged at every whim as children.  Guilt-laden dual-income parents gave them everything they wanted and let them get away with murder (sometimes literally).  Coddled all the way through college (don't like your grade?  Get the professor fired!) they are unprepared for the "real world" where exceptions are not made for "exceptional" kids and participation awards are scarce.  The net result of being coddled as a child is that it is ten times as difficult as an adult, as you chafe against these restrictions.  I know this, having gone through it.  Better to learn discipline early on than have it forced upon you as an adult.

In a way, though, the young people today have a point.  It is only at the end of life - where I am right now - where you might get a decade or two, if you're lucky, to really sit down and enjoy life and contemplate things.  That is, if you are lucky to live that long.  There are no guarantees.  It seems unfair at the time, that you have to work for so long just to relax.  I chafed at this at age 25, and then woke up one day and realized there was no realistic alternative and expecting massive social change as a life plan would only insure I would remain a slave forever.

Compounding this problem today, though, are the new forms of toxic debt that young people can incur - starting out a working career tens of thousands of dollars in student loan debt, for example.  Then there is the temptation of credit cards - a heady cocktail that is hard impossible to resist for the unfinished minds of a 18-25 year-old.  So right off the bat, they find themselves in a hole and have to start digging their way up, just to find daylight.   Maybe perpetual debt for a working Joe in 1960 wasn't so bad, when you are starting out even-Steven.  You borrow money back then, you get a house, or a car.  Today, you have to borrow money to get the credentials to get the job that will allow you to borrow more money.

It was not Mark Twain but Henry David Thoreau who made the remark "beware of all enterprises that require new clothes."  Apparently, he was living stingy back in the day - wearing clothes until they fell apart. That quote has been banged around quite a bit over the years (being attributed to Twain, for example) and also morphed into, "Beware any job that requires new clothes" which I think is a totally different meaning - but nevertheless also a valid point.

I have read online some nonsense about how minimum-wage fast-food workers are required to buy their own "uniforms" and have the cost deducted from their paycheck - the point where their first paycheck is almost nothing. You shouldn't have to pay to work - that seems like a simple concept.  And if your paycheck zeros out, well, you're working for free, and that is pretty much slavery.  One reason I quit United Parcel was that as a new Union member (which was required, once I was hired on full-time) my next paycheck would have been zeroed-out because the union dues and initiation fee would have consumed a week's pay.  Here's a hint for the Teamsters:  Spread that shit out over 52 weeks and it won't seem so unpalatable!  I probably would have stayed on for a few months, at least.

But just as having to buy a crappy knit shirt with the logo of a fast-food chain is unfair to a low-wage worker, one has to wonder whether it is "fair" that a person wanting to better themselves has to pay for the privilege.  I mean, I know I had to, incurring the equivalent of $80,700 in 2002 dollars (and paid it all back, thank you) to get a college education and post-graduate degree over 14 years of night school.  I mean, I don't regret it and I came out ahead in the end.  But for others, well, they start out even-Steven, not in an $80,000 hole in the ground.  For example, my siblings.

In a meritocracy, shouldn't advancement be based on merit and not your birthright or even chance?  My siblings didn't have to take out student loans or go to night school to complete their undergraduate degrees, because when they went to college, my Dad wasn't spending money on hookers using our my college fund.  Not that I'm bitter about it or anything.  I mean he's dead now, along with our cats that he killed.  Nice guy.

But I digress.  The real issue and the end result today is that we have a lot more people with ever-more intractable debt, and many of them make poor, immature choices in their youth and now have to spend the rest of their working lives paying back debts. Student loan debts survive bankruptcy intact, and even credit card debts have to be "worked out" over a five years or so.  In the old days, you got a "do-over" if you fell in the debt hole - and as a result, banks wouldn't lend you enough money to fall into that hole.  Today, they realize there is more money to be made in ruining people than in doing business with them.  A whole industry has arisen to buy and sell these people - or at least their debts - with the promise of debt consolidation, or extending the terms of the loans, or whatever.

I noted before my neighbor got into this "peer-to-peer" lending gag, where he "invested" (not loaned!) money to help people consolidate their debts.  Each debtor was sliced and diced up into chunklets and these were sold off as securitized assets.  You bought a chunk of debt - a chunk of Debbie and her student loan and credit card debacle - and hope she would pay it back.  Since Debbie has a shitty credit rating (because she can barely service the debt) she cannot go to a conventional bank or lending agency for relief from high-interest credit cards.

So you buy a piece of Debbie - or her debts - and she goes off to work every day to make money to pay you.  Not much different than indentured servitude, if she never gets ahead of the game. The only real difference is that with indentured servitude, the master is also the lender and the servant is also the borrower.  There is a direct connection between labor and debt, which people found abhorrent. With modern debt-slavery, the debt are securitized and commoditized and sold off to investors.  Meanwhile, others buy Debbie's labor and that money is passed to the the owners of her debt.  Two masters, one servant.

Like I said, maybe it is not such a bad game, provided that it isn't like The Squid Game - nearly impossible to win.  That show (which I never watched - it was too creepy and violent) was apparently very popular in South Korea, where many working-class people are hopelessly in debt.  The birth rate in that country is now 0.8 - the lowest in the world - meaning that their population is actually shrinking.  When you saddle people with so much debt and make it so hard to get ahead, they give up "luxuries" in life like reproduction.  It is behavioral sink in the classic sense - a society that is literally dying while at its apex.

As a society - as a planet - we have become so obsessed with rate-of-return and profits that it seems we've forgotten why we were doing this in the first place.  Sure, you could increase "profits" at your factory by enslaving your workforce and chaining them to the machinery. But that would be short-sighted (and illegal, of course) as those workers (and millions more like them) are also your customers.  You screw the middle-class, you screw your customer base.  They run out of money, they stop buying things. You try to cut costs by laying off workers, that just throws gasoline on the fire.  Meanwhile, Wall Street rewards you for the layoffs with a short-term spike in your share price.  It is not a sustainable model, however.  You cannot layoff your way to success.

We have to make the game winnable if you expect people to play.  It can't be like the Squid Game or the Hunger Games, where you play at gunpoint.  That model (Communism) has been tried in the past and shown not to work.  Solving this problem doesn't mean fixing one simple thing, either - it is a problem that has been accumulating for decades and has a myriad of sources.  It isn't a simple matter of just student loan forgiveness or free college, or bankruptcy reform.  Radical changes to our society are not likely to occur.

A society exists to serve the people in the society - all of them, not just a few at the very top.  We came close to achieving this, not a very few years ago.  It seems today, though, we have become more heartless and belligerent.  "I've got mine jack, you get yours!" is the new mantra.  And while I am no big fan of Socialism or Communism, Capitalism doesn't have to allow for people to be mercilessly exploited to the point of extinction.

"No one wants to work anymore!"  "No one is having kids anymore!" - those who have. raise these rallying cries.  It isn't that people don't want to work or don't want to have kids, it is just that they don't see themselves as being able to afford children, and they don't see "work" as a viable way out of the mess they are in.

Would you like another slice of Debbie?