May 18, 2022

A Christmas Carol and the Rise of the Debt Society in the 21st Century

these were so dodgy. As in managing their wealth to use. No moderation – none in both types. (Dante’s Hell)

I revisited Charles Dickens’ Victorian Christmas Carol several weeks ago on modern Christmas Day. I have collected similar stories of doom about inequality and poverty between the English Victorian era and the 21st century, although the idea of ​​the sin of greed in Charles Dickens’ Christmas carol is probably outdated. Dickens’ story epitomizes the nature of the contemporary economic problems we face, in terms of interests, debt traps, and the significance of financial economics to the haves and have-nots. If we want to understand the growing inequality of income and wealth between them, which is not by chance, we must question the organization of society by looking at the history of the banking system. .

The development of the banking system was linked to religious values ​​and sovereign debt. Originally, the Catholic Church, as well as other Abrahamic faiths such as Islam and, in the confined community context (monetary interaction between Jews, and not between a Jew and a non-Jew) Judaism, prohibited usury or the act of lending money with interest at any rate. People in ancient and medieval times viewed this as an act of economic exploitation and injustice by the privileged against the poor using these financial instruments. It was (and in the Islamic world “still is”) economic exploitation because the rich take advantage of the desperate condition of the poor. This was an injustice because the actions often forced the poor to be trapped in debt for life without forgiveness. “Debt” was a concept associated with slavery (serfdom). The mortgage meant “pledge of death”. The religious ban limited the expansion of money-lending activities in the Christian world until about the 13th and 14th centuries, when Italian banks such as the Medici Bank were established and began to influence other parties. of Europe financially and culturally.

Christian attitudes towards usury or interest, in which Scrooge’s company was involved, changed over time after Italian financial innovations. These included the Medici bill of exchange, banker family popes such as Pope Leo X (1475-1521) and Pope Clement VII (1478-1534), the sale of indulgences that promised forgiveness of the penalty for sin, and more importantly the Reformation. John Calvin proposed the authorization of loans of money with low interest rates, which led to the creation of Swiss banks. The definition of “usury” has changed from lending money at any rate of interest to that at “high” interest rates. Many Protestant countries accepted low interest money loans in the 16th century. It was Victorian England that abolished all restrictions on money lending, thus allowing money lenders to legitimately charge high interest rates (1845). So Scrooges’ company could also charge high interest if he wanted. Lending money was probably not a respectable occupation during Scrooge’s Victorian era (1837-1901), however, which is in stark contrast to the present time.

Money lending was probably a profitable business in Victorian times due to the poor economic conditions of the working class which resulted from low wages and irregular incomes. The Enclosures were also responsible for their desperate financial conditions as it made small landowners jobless and landless or, in contemporary terms, homeless. These populations have moved to urban areas to find jobs, often poorly paid.

The interest rate in the 21st century is not understood from a religious point of view, but from that of consumer protection. Although anti-usury laws differ from country to country, many countries regulate the level of interest by capping interest. The United States has anti-usury laws at the federal and state levels, but maximum interest rates depend on individual US states. The dual system, however, appears to not work properly as it pushes the financially desperate population into debt traps. Various short term or emergency loans such as payday loans and high interest rate card loans are currently operating in the United States. When it comes to credit cards, state anti-usury laws are ineffective because higher interest rates in deregulated states such as Delaware (no limit when loan exceeds $ 100,000) and Dakota. South (no regulation) can be exported to other US states under a 1978 US Supreme Act. Court ruling in Marquette National Bank v. First of Omaha Corp. Consumer protection systems have apparently broken down. The underlying problems in the contemporary United States, low wages and unemployment, are similar to the British Victorian era as well as the Golden Age of the United States (1870-1900).

Besides private debts, the development of the financial system was also associated with sovereign or royal debts. For example, the English Financial Revolution, in which William III introduced the Dutch financial system shortly after the Glorious Revolution (1688), allowed England to pay for a costly war with France by first issuing bonds (the public debt system) and creation of the Bank of England (1694). Since then, sovereign debts and wars have often been great opportunities for financiers to make their fortunes by earning interest.

The current financial system is fairly primitive, if not cunning and sinister. It serves the oligarchy (creditors) to the detriment of non-managerial employees (debtors). Society is rife with huge private and sovereign debt. The financial industry is profitable as long as people borrow money (for example, mortgages and credit cards) and repay with interest, especially with higher rates. Low wages, expensive housing, and problematic government tax revenues are the best conditions for financiers to make profits as long as they pay back.

Are there solutions for today’s society swollen by debt? Some may come up with strict usury laws to protect consumers, which would help. However, it is not enough to improve the personal finances of low-income families. What low income families need is a decent income and a roof over their heads. The current problem is the absence of a mechanism for equitable distribution of benefits between managers (salaries, bonuses and dividends of managers) and employees (remuneration and bonuses of employees). The minimum wage amounts are too low. This has allowed executives to earn immense income at the expense of the standard of living of the employees. Shareholder primacy and share buybacks have also helped increase the wealth and income of the rich. The distribution of a share of all the profits was left to the moral conscience of the leaders, which was never a solution.

Chains of greed are now circulating all over the world. Another global financial crisis is looming on the horizon. It is highly likely that there will be no bailout this time around, resulting in the loss of pensions, insurance and savings. As Tiny Tim’s fate was closely tied to Scrooge’s, two different classes are in the same situation, both sleepwalking until they are swallowed up by the Financial Leviathan.

Teaser photo credit: by John Leech –, public domain, https: //commons.wikimedia. org / w / index.php? curid = 4581698

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