Subsidising Poor Choices

[Barney]

I think it is true that some people are poor not of their own choice. I think it is also true that some people are exploited although, as you say, this is another conversation.

What do you tell these people? It's not your fault? Which is to say, there's nothing you can do? You've been exploited? No, this is not helpful! This drives them further into despair. There's nothing they can do and they are being taken advantage of. What needs to be said is, look here are the things you have control of, in other words, what you are doing wrong. If they are in a bad situation and they are in control of some key driving forces behind their situation, one can only hope they are doing SOMETHING wrong. Then you give them some hope, some control over their future. If they are not walking around thinking everyone is trying to take advantage of them perhaps the world will open up to them.

My first question when I'm confronted with disadvantaged people is not "what do I tell them?" It is "what can I do to help them?" Still, it might be that the best way I can help them is by telling them something. How do I know what the best thing for them to do is? I have to take the time to learn about their situation, see it from their point of view, understand their constraints and difficulties. Only then can I advise them helpfully about what they might do to improve their situation.

And that is exactly what I did when I was in London. A group of us founded a debt advice charity. This charity never gave any money to anyone. It gave time. If someone came to us, we would ask them to let us see all their financial details. Then we would look carefully through, and come up with a plan for how they could spend less and earn more. We might also advise them to move their debt from a high-interest creditor to a low-interest creditor - something they might not have known was possible, or known how to do it. In my experience, most of the people who came to us were not born in the UK and their level of English was not great. They were unfamiliar with UK financial culture and law, and thus rather helpless. Quite likely they had been taken advantage of by creditors who knew that these people couldn't decipher the fine print of the debt. Is there anything we can say about the morality of such creditors?

These people did need to be given agency. But they could only be given it by people who had compassion on them in an active way.

[Ondrej]

My first question when I'm confronted with disadvantaged people is not "what do I tell them?" It is "what can I do to help them?" Still, it might be that the best way I can help them is by telling them something. How do I know what the best thing for them to do is? I have to take the time to learn about their situation, see it from their point of view, understand their constraints and difficulties. Only then can I advise them helpfully about what they might do to improve their situation.

Yes, exactly!

Giving them money doesn't even really help them. It kind of does in the sense that maybe they can pay a bill or two but it's not addressing the real problem. What is the real problem? Well, that's not so obvious. Can't I just throw money at it. NO! We have all the money in the world and money doesn't help. That's the quote from Rand about the only people fit to inherit wealth are those who don't need it.

Quite likely they had been taken advantage of by creditors who knew that these people couldn't decipher the fine print of the debt. Is there anything we can say about the morality of such creditors?

Probably we can spin a tale of evil capitalist overlords who are reveling in their mansions full of cash drinking the tears of the peasants from their wine glasses. Or is that too much? Are we wanting a villain story or are we wanting to understand how regular people and businesses create problems? Creditor says, well you are not a very reliable loan, you have low credit, you are unlikely to pay your debt back, but if you paid 30% interest for six months and paid half of it back we would break even on the transaction and any extra would be profit. Ok, you're approved, it's a gamble but you're approved. Maybe instead they will be ethical and say, no, you're not approved, go and starve, you foreigner. You see how it can be twisted whichever way you like. They are either taking advantage or they are racist. The truth of the situation is that the person has not shown they can pay anything back. And on top of that they're in a bad financial situation or they would not be asking for money. So what's a lender to do? I do not immediately assume evil nefarious plots behind such things. It all makes perfect logical sense without need for smearing the business.

About the fine print... it's not just foreigners that struggle with the fine print. With my last loan I asked for the equation that would calculate my interest or payment going forward. It was all described in the text of the loan but there was no equation anywhere where you could actually calculate it. I asked the loan agent, she said "oh it is calculated by computer". Thanks! I repeated that I wanted the equation they used to calculate it. That the computer was using an equation and I wanted to know what it was. She gave me an e-mail address I could inquire on it. I did. They basically said we can't answer that. I wasn't sure if it was that they didn't know (I think most likely) or that their calculation was not what was described in the agreement. In any case. There's probably a TON of lawsuits waiting to happen if people would read and understand the fine print.

[Barney]

Probably we can spin a tale of evil capitalist overlords who are reveling in their mansions full of cash drinking the tears of the peasants from their wine glasses. Or is that too much? Are we wanting a villain story or are we wanting to understand how regular people and businesses create problems? Creditor says, well you are not a very reliable loan, you have low credit, you are unlikely to pay your debt back, but if you paid 30% interest for six months and paid half of it back we would break even on the transaction and any extra would be profit. Ok, you're approved, it's a gamble but you're approved. Maybe instead they will be ethical and say, no, you're not approved, go and starve, you foreigner. You see how it can be twisted whichever way you like. They are either taking advantage or they are racist. ... And on top of that they're in a bad financial situation or they would not be asking for money.

Actually it usually does not start with the poor person asking for money. It starts with a leaflet coming through the poor person's door, printed on glossy colored paper, saying in big letters: "Are you struggling to pay the bills? Why not take out a loan until your situation improves? Interest FREE for the first 6 months!." (it doesn't say what the interest will be after the first 6 months, but who cares? by that time your situation might have improved.) I know this because I lived in a low income neighborhood and I got such leaflets through the door regularly. My education and upbringing gave me the wits not to accept such an offer even if I was struggling (which I wasn't because I had a job that resulted from my 4 year Computer Science degree, which I did not pay for and which most of these people can only dream of being able to afford.) But many of the poor people do not have such an education, nor have they ever had the luxury of thinking long-term. Their circumstances have inclined them to think only about putting bread on the table this week, and to look no further than that. Oh yes, we could blame them for their folly. They are so stupid. They should have known better. They should have remembered to think long term. Sure, they aren't perfect. Either way, the leaflet gave them an idea they would not otherwise have had, and six months later they enter that horrible vicious circle where the debt increases even as more and more money is going towards trying to pay it off. If they hadn't got another leaflet through the door, saying "Do you want debt advice? We offer it for free!, then they would probably have continued paying it for decades even as it continued to get bigger. Yes, it's their own stupid fault. They should have been smarter.

The creditor doesn't need the debtor ever to be able to pay the debt off. In fact, it's better if they don't. It provides a regular source of income for nothing but a small accountancy administration fee. I'm spinning no tale. I've said nothing about who is evil and good in this situation. Rather, I'm asking the question. What do we think about people who make money in this way?

[Ondrej]

What do we think about people who make money in this way?

I think it is wrong.

[Barney]

Why is it wrong? Both parties consented freely to the transaction.

If we are in one breath critical of capitalism and in the next breath asking what we ought to do, does it not follow that in the third breath we will be passing reforms of capitalism to "help" people do the right thing?

If you're saying it's wrong, are you in the next breath going to pass a reform to try and prevent this behavior?

[Ondrej]

I had a good long think about this one. Why exactly is it wrong? Is it that the lenders lent money? No. Is it that they charged interest? No. Is it that the borrower is having trouble paying it back? No. All of these things can happen and it not be wrong. So what is wrong?

I think the answer is that the lender is purposefully trying to hide the true nature of the agreement. It is made to seem like sunshine and rainbows and the bitter truth of what the borrower will experience is not put in plain view to be evaluated. The lender attempts to get as close to deception as legally possible so that the borrower is not aware of what the transaction really is. This is why we say it is unjust. The borrower was not performing a transaction he really agreed with. In other words, had it all been made clear to him he may have chosen differently. This is bordering on theft. It is at least theft in spirit even if technically it is allowed by law and I can imagine why is it not so straight forward to create a law to prevent it.

It seems that in this case you are suddenly very keen on "protect the individual who wants to keep his or her stuff".

[Barney]

I think the answer is that the lender is purposefully trying to hide the true nature of the agreement.

Yes, I think this is correct. But is this not what happens, to a greater or lesser degree, in all marketing and salesmanship? You don't advertise the downsides of your product, you advertise the upsides. You make a big deal out of what makes your product seem great, and hastily skip over the worse elements.

A huge amount of business, if not all business, depends on particular expertise that one party has, that the other party is paying for.

• For example, if I make a website for someone, it is probably because I know what is involved in making a website and they don't. If they knew it as intimately as I did, they would make it themselves. This means that I am also able to charge them for things they don't really need, because they don't realize that they don't need it. This happens quite a lot. People are generally nervous about computer technology and want some expert to just do it for them. The trouble is, many website companies take advantage of that nervousness and charge much more than is needed. If a company charges less, it is viewed with suspicion as meaning that the quality of the product is inferior. And if you're not a website expert, how would you know?

[Barney]

It seems that in this case you are suddenly very keen on "protect the individual who wants to keep his or her stuff".

Yes, I am, but not by reducing their taxes. Why am I more interested in protecting the poor individual than protecting the rich individual? Simply because the poor individual can't protect him/herself. The rich need not worry about how they will pay the bills, and what kind of miserable things will happen to them if/when they aren't able to. They have not had their landlord making dire threats about kicking them out of the house, or about angry letters warning the consequences if they don't pay soon. The rich are free of many common anxieties and worries. For sure, they have their own anxieties - like, what will happen if someone breaks into their house and steals their home cinema. But even those they can do something about, and even those are high level concerns.

[Ondrej]

Yes, I am, but not by reducing their taxes.

My point was that suddenly keeping your stuff isn't so morally questionable. You don't advise them on how to be better people and not focus so much on their stuff. You advise them on strategies how to keep more of their stuff and how to prevent people from taking it.

Why am I more interested in protecting the poor individual than protecting the rich individual?

I am interested in neither, or maybe both. I am interested in the principle. If it is wrong to lie, cheat, and steal, then it is wrong to lie, cheat, and steal. Doesn't matter who you are. I view charity as right and good, but government coerced "charity" as theft. If you see your brother thirsty and do not give him a drink, YOU are held accountable, not the government. Voting for government programs to do what you are convicted to do at someone else's expense is even worse than not giving your brother the drink. Sure, he may get the drink but it was not out of kindness and compassion, it was out of bitterness and envy toward the rich and coercion to get them to do what you want. Your compassion and desperation to do something, no, to see that something is done, allows you to compromise the principle that you will not rob others. You justify it because you do not feel compassion for those you rob. And not you, Barney, but the you that is the idea speaking. The idea is in everyone's head. One will examine their own motives and say but I'm not really envious of the rich. Neither is that idea yours. The idea IS envious of the rich. It is proud and presumes it knows how everyone should behave and will coerce them to do so. It does not say let everyone else be free but I will take the burden of the world upon my own shoulders. It want's to place the burden of the world on certain other people's shoulders for the benefit of everyone ELSE. This is wrong. This is slavery. It is the opposite of Christ.

[Ondrej]

But is this not what happens, to a greater or lesser degree, in all marketing and salesmanship? You don't advertise the downsides of your product, you advertise the upsides. You make a big deal out of what makes your product seem great, and hastily skip over the worse elements.

Yes, that's why I mentioned that I couldn't see a clean way to ensure it doesn't happen. It isn't ideal and we do compel businesses in many cases to put up disclaimers and disclosures. I'm currently in the process of selling my house and inspectors keep finding things wrong with the house. My agent keeps telling me "unfortunately we are now bound by law to disclose that". And I'm so encouraged. Yes, this is right. We need to disclose this. I'm just so glad I do not have to fight with my agent telling her, no we need to be honest and disclose this. It is not right to hide the faults and sell it. That is theft. We want a trade where everyone knows what they are giving and what they are getting and everyone is happy with it. Then everyone profits.

I should perhaps specify, I do not think swindlers and cheats are participating in capitalistic behavior. They are thieves. They are anti-capitalist. They are not "making money" in the sense that they are producing what other people want and trading with them. They are taking money by deception. I am all for making rules to ensure transparency and honesty. But I do not endorse the government participate in taking money as compensation for some businesses taking money.