Finance is Eating Itself
By Emma Caterine
While I talk about my legal work in this piece, the opinions expressed here are mine alone and do not reflect those of any of the organizations I work with.
One of the great ideas of socialism is that it is labor that creates value. This is a strange idea to the bosses who are convinced that everything was made by them, but it is something that every worker knows in their heart to be true. And the injustice of this political system is that even though we’re the ones making and fixing and selling things, they don’t give us enough money to live. The reason that they don’t is simple – to get rich. But it is never enough. They were not satisfied with being millionaires, so now we have billionaires, and while their money grows ours barely moves.
But here is the problem: rich people do not buy a lot of things. Yachts and $300 vodka is not enough to power an economy. They need us to buy things even though they do not give us enough money to do so. This contradiction is one of many in capitalism. It is why Karl Marx once wrote that the bosses create their own gravediggers. But the bosses are not stupid because they can afford to not be. They bribe the smartest graduates in economics, math, and sociology to help them figure out how to get out of this problem. And the most common way of doing that is credit.
Credit takes many forms like auto loans, credit cards, and mortgages. But what they all have in common is that they give people the ability to buy things even though they do not have the money to do so. Sounds like a great deal, but the catch is interest. While we all know that we have to pay back more than we take with a loan, the finance companies hide just how much they will try to leech off you. Like an immature child, capitalism does not clean up its messes but puts them off until later, by which time they have gotten much worse.
And you better hope your life remains stable while you are paying off a loan. I work in the courts, defending those who finance companies are suing for not making payments on loans. Every single one of them, every one, is there because of an emergency in their life. Some lost their job. Some got into a car accident. Others co-signed a loan with a son who they no longer speak with. And yet others are spending their last days on this earth, fighting in court about medical bills for the very illness that is killing them.
But working people do not have the option of only taking loans when we are doing well. In fact, we often take out loans (especially things like car title loans and payday loans) when we are not doing well. They want you to think that only irresponsible people get into debt, but the truth is this: the majority of our economy is based on household debt. Household debt is 79.75% the size of the country’s GDP. And that’s lower than usual: before the Dodd-Frank Act, the abundance of subprime mortgages and other ultra-predatory loans had it reach 99% the size of GDP. That alone should make us worry about the Republican plans to gut the Consumer Financial Protection Bureau (which enforces the Dodd-Frank Act).
But even the protections of Dodd-Frank Act are not enough to undo these contradictions of capitalism. While subprime mortgages have become rare, subprime auto loans are at an all-time high: auto-loan debt is above $1 trillion. Politicians, bribed by the finance companies, are trying to bring in payday loans to their states. Some even have the gall to say that payday loans help people of color or poor people when the truth is that they put us into debt traps. And a whole industry has emerged of debt collectors who buy debts from banks and use abusive and deceptive practices to get the money.
But what might be most frightening is student loan debt. Because with other debts there are usually some options to negotiate: to give back the car, to file for bankruptcy, to set up a payment plan that fits your wages. There is no car to give back with student loans. The most recent bankruptcy law, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), made it so student loans are almost impossible to discharge in bankruptcy. And the massive amounts that student loans deal with – tens of thousands – make companies unwilling to set up a payment plan that works with our income. I have seen folks who are told they’re going to have to pay 30% of their income for a decade or more. When you’re making $30,000 or $40,000 a year, you cannot spare 30% of your income for just one bill. It is a sentence to destitution, to extreme poverty. There is $1.31 trillion of student loan debt, spread out among 44.2 million people, with average payments of $351 a month.
The liberals and even some Republicans will tell you that this is just a problem coming from a few kinds of loans or not enough regulation. They said it about subprime mortgages a decade ago and they blamed it on broker’s loans following the Great Depression. They can always find a scapegoat to avoid the problem: as long as we allow the bosses to take the value that we make, our lives will always be in debt. Only socialism can get us out of this trap.
Emma Caterine is a law student and writer with ten years of experience working within economic justice, feminist, LGBTQ, and racial justice movements. Follow her on Twitter at @EmmaCaterine. Check out her blog at habeasquaestus.com.
Get Help Here
File a complaint anywhere in the US at the CFPB: consumerfinance.gov.
Information on debt collection: https://www.consumer.ftc.gov/articles/0149-debt-collection
Information on student loans: https://studentloanhero.com/blog/
Michael Roberts, thenextrecession.wordpress.com