Financing Our Freedoms
What to the debtor is freedom?
During his 1941 State of the Union Address—known most commonly as his Four Freedoms Speech— President Franklin Delano Roosevelt first enunciated his aspiration to secure a country whose citizens “are free from want.” That is, FDR aimed to advance a nation whose citizenry held the right to an adequate standard of living, one that would establish a minimum threshold for food, clothing, housing, and healthcare at subsistence levels. Today we in good conscience could append to his list an additional freedom: Freedom from Chase.
Such an amendment is ironic, to be sure, because JPMorgan Chase—now the country’s largest financial institution—very recently introduced a new credit card species: Chase Freedom. Don’t believe me? Navigate here. In one defiant co-optation of democratic principles JPMorgan Chase has effectively managed to frame freedom financially. Any genuine meaningful achievement of freedom in a social-democratic sense must entail, however, the provisioning of necessary social goods—especially food, clothing, healthcare, and housing—as a social right rather than as a byproduct of debt. Nearly a century ago German philosopher Friedrich Nietzsche presciently opined that “nothing has been purchased more dearly…than a sense of freedom.” His words are eerily relevant to our time.
Simply stated, the socio-economic model upon which the welfare of our citizenry has been premised (for at least the last forty years) has failed. We live in a world where the reality of debt, rather than that of rights, has become the primary means for accessing basic social goods like food, clothing, housing, and health care. Such a social paradigm is premised on the notion that uncollateralized credit will fill the vacuum left by stagnating real incomes and the state’s systematic disinvestment in working people. In this sense, then, “high finance [is] inextricably intertwined with the privileges of citizenship.” We would do well here to remember that freedom “in” corporate capitalism isn’t synonymous with freedom “from” corporate capitalism.
Whereas over the course of the last forty years average weekly earnings for private, non-farm workers in real dollars (BLS designation) has increased by 6%, inflation has ballooned by nearly 138%.. And in order to compensate for stagnating real wages U.S. laborers began working longer hours to afford basic necessities. The average number of hours worked per year by an American has risen by nearly 20% since 1972. By comparison, since 1972 citizens in France, Germany, and Italy have worked 20% fewer hours.
Secondly, beginning in the mid-1970’s U.S. workers began binging on credit at unsustainable rates simply to purchase basic necessities. That is, Americans were given the “freedom to borrow” through the instrument we now know as the credit card. The credit card is little more than an apparatus that allows banks to lend to the working class with no collateral other than an 18%, on average, rate of interest. By way of comparison, the U.S. Federal Reserve Bank recently lent $7.77 trillion in bailout money to the six largest U.S. banks at a “below market rate” (a euphemism if there ever were one) of 0.1%.“The freedom of the masses,” as economist Karl Polanyi predicted, “[will] be restricted in favor of the freedoms of the few.”
The finances of the masses are today in the red. By August, 2010 mortgage, credit card, student, and auto debts rested aggregately at a staggering $13.5 trillion. And by October, 2010 the total U.S. household debt achieved parity with the annual GDP. On a smaller scale, the average household earns approximately $52,000 per year, a figure far lower than the $120,000 of debt for which each household would be responsible if debt were distributed equally. And amidst these disquieting statistics nearly 25% of Americans currently have no savings. Black and brown citizens suffer disproportionately in this regard.
Debt-financed consumption corresponds to the inability of most households to maintain existing rates of sustenance by virtue of stagnating real wages. And although conservatives submit that unmanageably lofty consumer debt loads are primarily the result of luxury purchases by irresponsible borrowers, the numbers simply don’t add up. Most borrowers had been buying necessities—not luxuries— on credit. Sub-prime mortgages, for example, were and are often the only way for many working class citizens to become homeowners. And where is affordable housing to be found when the Department of Housing and Urban Development’s (HUD) budget is being slashed by nearly $4 billion next year alone? Similarly, student loans were and are often the singular means by which many students gain access to higher education. As I have written before, student loan debt has surpassed total credit card debt and is projected to surpass the $1 trillion by early next year.
The basic U.S. social contract for the last forty years has been predicated on, and subject to, the vagaries of creditors, not the guarantees of the state. To this end, creditors have sought with reckless abandon to liberalize markets and to deracinate the state. As a result, access to basic social goods today is much more a claim against private banking institutions than against society. In light of such a sobering reality, what then is freedom to the debtor?