A Capsule History of the United States
Everybody knows that old saying, “nothing is more certain than death and taxes.” It’s also hard to escape from “debt and taxes.” In fact, you could write a political history of America by focusing on debt. There are so many examples.
The landless and other poor in Europe migrated to the New World in search of their plot of land. Many were so destitute that they paid for their voyage by becoming indentured servants—a form of temporary slavery. So, they stepped off the boat, already in debt.
Hunger for land pushed settlers to move into areas where territory had been set aside for Indians. Over time, the debtors’ trespasses led to the French and Indian War.
During the American Revolution, the Continental Congress had a terrible time raising funds for financing the war. Bonds were sold and over time, their value fell and less affluent owners sold them at a loss to speculators. After the Constitution was ratified and the Washington Presidency took office, Alexander Hamilton came up with a brilliant plan to put the new national government on a firmer fiscal foundation. It had many elements, but one that stuck in the craw of Jefferson and many others was that current bondholders were going to pay well for their formerly almost worthless paper. This seemed so unfair to the ex-soldier, the yeoman farmer, and the small business man who had bought the original bond. Eventually this argument and others created the first political parties in the US—the Federalists and the Democratic-Republicans (Democrats, for short).
As populations rose, land became scarce and tenant farming started up in many states. Tough legislative battles were fought to allow for longer leases and payment for property improvements if the land was to be sold. Similar conflicts occurred over ending indentured servitude and imprisonment for debt.
Land speculation was rampant. Shysters bought up lands from the unwary when they could. The lack of uniformity of money and contracts and the poor quality of surveying gave rise to land loss, more debt and just being “fleeced.”
Then for miners, there was the infamous company store where you paid more for less. I can hear the song by Tennessee Ernie Ford:
You load 16 tons, and whataya get?
Another day older and deeper in debt.
St. Peter don’cha call me, cause I can’t go.
I owe my soul to the company store.
Similar arrangements spread throughout the South after Reconstruction in order to keep the “free” black tenant farmer in his place.
Creditors wanted deflation and debtors hoped for inflation. These two classes went head-to-head, when a large fall in agricultural prices caused thousands of foreclosures and the birth of the Populist Party and movement. Many populists looked to silver as a new means of backing currency and flooding the market with additional money. (Remember William Jennings Bryan’s campaign speech about the “Cross of Gold.”)
The growing size of banking trusts fed anger toward financial interests and movements to prohibit interest on loans or to have interest rate caps. (The latter were called “usury” laws, which once existed in state ordinances.) And in 1915, the Non-Partisan League, a political organization formed by ex-Socialist Party organizer, ran as Republicans and took control of the state legislature in North Dakota, elected a farmer as governor, and enacted much of their agenda, including a state Bank of North Dakota, which still exists today.
In the 1920s, buying on installment was created, leading to the phrase: “Pay a little now and then pay forever.” Consumer lending rose to $7 billion in 1929, just before the Great Depression.
The first credit card was Diner’s Card in 1950. American Express did not arrive until 1959. Once a rarity, now such cards are advanced to all – even to those who are already in debt. The intentions are to keep folks in credit card hell, paying astronomical rates of interest on overdue balances.
Today, there is sub-prime lending, manufacturing housing finance rip-offs, and horrible, confusing terms in scores of insurance products.
An anti-debtor bankruptcy law was enacted by the current Administration.
Lastly, it was necessary to fight off the campaign to privatize social security pushed by the Bush White House.
The more things seem to change, the more they are the same.
But the crusade for financial products that broaden ownership continues, as do efforts to protect assets from the predations of the unscrupulous and just bad luck.
The asset-building movement should not forget its past and keep its eyes open for new policy “con games.” They will certainly reappear.