Modern Usury

There are reasons we have usury laws. Loan sharking has been one of the most insidious practices plaguing human society since time immemorial. When people become trapped under excessive debt there is often no way out. The debtor isn't the only one hurt. He becomes an unproductive citizen. An unbreakable cycle of poverty sets in. The entire community suffers.

We figured out a long time ago debtors prisons aren't the solution. For centuries my church prohibited charging interest on loans altogether. We still have some awkward practices in internal church finance. For devout Muslims traditional borrowing is problematic even today.

But capitalist society has adopted the Calvinist notion that an investor should expect a reasonable return, including interest on loans. It has been a great boon to human progress. It is hard to see the industrial revolution advancing to where it is without debt financing. Few of us would own our homes without mortgages. I doubt many of our streets would be paved without municipal bonds.

But there are dangers and in this country every state has laws and regulations in place to protect both borrower and lender, which brings me to payday and auto title lenders, sometimes called storefront lenders. They are everywhere in Plano. There are more of them than there are McDonalds. These lenders are predators. They attract people who are strapped for cash, offer them a small short term loan for an exorbitant fee, greater perhaps than the amount of the loan, and they very often have them hooked. When the loan comes due the fee must be paid but none of it goes toward principal. The loan is typically rolled over, for another fee. Over a few months the borrower can pay several times the original loan in fees. Effective rates can exceed 500%. This is usury and in Texas it is perfectly legal.

Dallas, Austin, San Antonio, and El Paso have all passed lending ordinances in an attempt to limit abuses by requiring loans be paid off in no more than four payments. But lenders just relocate and set up shop outside the city limits, adding transportation difficulties to highway robbery. This is a state wide problem, not a local issue.

Attempts in the last legislature to bring some modest regulatory controls to these practices went nowhere. Reformers will try again this year but prospects don't look good. These businesses are making a fortune and they don't hesitate to spend millions lobbying to protect their lucre. I doubt much serious work will be done until there is a public outcry and so far there hasn't been much. Advocacy groups are lonely voices right now on this topic, though some are well organized and resourceful. Texas Catholic Conference is one.

What's needed are statewide caps on rates and fees, limits on the number of loan renewals, a requirement that installments pay down a minimum portion of the principal, and insistence that lenders consider borrowers' ability to repay. It wouldn't hurt to look at regulations on traditional lending to see if they couldn't be tweaked to encourage regular banks and credit unions to make these loans. There is a bank on every corner in Plano too.

These are small, short term loans with significant transaction costs made to people without stellar credit. They are high risk and necessarily high cost. Lenders have every right to expect a reasonable return and people do need access to these loans. But current practice is not reasonable. It is unconscionable. It is not in the best interest of Texans to be building whole new classes of the permanently poor, poor with no way out. That is what is happening and we need it to stop.

Heroes

A recent acquaintance holds up Dorothy Day as a personal heroine. Dorothy Day was a twentieth century pacifist, anarchist, socialist, and co-founder of The Catholic Worker.  She has now been recommended to the Vatican by the US Conference of Catholic Bishops for sainthood. Her movement survives, feeding the hungry, sheltering the homeless, advocating for the downtrodden, and not least, devoted to prayer. There is much to admire.

But she is not my heroine. If we were all Dorothy Day we would all be poor. She would argue that would not be a bad thing, we would survive by sharing what we have. I would counter that we would have nothing to share. We would have no police. She would say we would not need them. Fair enough but I would respond that we would also have no roads, no sewers, no miracle drugs, no electricity, no levees to protect from floods, and precious little to eat. Oh and by the way, Pope Pius XI said "No one can be at the same time a good Catholic and a true socialist." I would add, no one can be at the same time an anarchist and a socialist, odd choice for sainthood.

I don't discount pacifism entirely, though I have little regard for anarchy. Martin Luther King accomplished great things with his non-violent movement. Mahatma Gandhi was a true pacifist and his may have been the most successful pacifist movement of all time. Like Dorothy Day there is much to admire in both men.

But my twentieth century hero is Norman Borlaug, the agronomist who has been called the father of the Green Revolution. Because of him, and others like him, a world of seven billion people can not only feed itself,  but do so in such a way that there are fewer of us living in poverty than when Dr. Borlaug began his work.

All four of these people devoted their lives to helping the poor and the oppressed. But of the four, Dr. Borlaug did the most to help them escape their poverty. Dr. Borlaug began his most important work in Mexico in the 1940s where he helped develop a high yielding hybrid wheat. That and improved farming techniques he brought from his native Iowa soon transformed Mexico from a net grain importer to an exporter. In the process a disruption began in the traditional semi-feudal relationship between farming peons and the ruling elite, a process that continues today.

Dr. Borlaug went on to take his hybrid grains to much of the developing world, including China and India. He was perhaps least successful in sub Saharan Africa where he ended his career. By the 1980s a growing environmental movement had begun to resist hybridized crops and artificial fertilizers, preferring organically grown indigenous foods. In Africa that meant cassava, not wheat. Incredibly an attitude developed that if yields were insufficient to feed a growing population then so be it. Better to let starvation do a little dirty work than feed the masses. End world hunger stopped being the life ambition for beauty pageant contestants in the United States. Malthusian worry about global over population became an over riding concern.

So food production never took off in Africa the way it did in much of the world. There is where poverty remains the most persistent. Ironically, for families engaged in subsistence farming child labor is important, the more  children the better. With technology knowledge becomes more important. Children are encouraged to stay in school. Families tend to become smaller and more prosperous. That is what happened in Mexico and in no small part they have Dr. Norman Borlaug to thank for it. He is their hero, mine too.