From Somasoul regarding The Borrower Is the Slave to the Lender?:
Man, I almost always agree with you but this week I think you're off the mark. And not just because I'm a Christian but because, like in all things, we should be wary of trusting forces larger than ourselves.
You have to admit: wariness of trusting forces larger than ourselves is a little ironic coming from a Christian. :)
However, I do think you are right to be skeptical by default of entrenched power structures, whether they are entities of the state or the free market.
I'm an anarchist and I don't just barge in with an attitude like other Anarcho-Capitalists who trust business' whole-heartedly without question. I think we need to not march to their beat, at least not so quickly.
Thankfully, I'm not an apologist for businesses and don't trust them blindly. From my studies, it's clear to me business motives and interests are far too frequently at odds with libertarianism.
First, I think you missed the boat in your assumption on the quote altogether.
The borrower is totally a servant to the lender. Because in most agreements the borrower agrees to work for the lender in exchange for money up front. The lender lends $100 but gets $150 in return. This might be a profit, yes, but it's profit based off someone else's labor, not your own. Therefore, whether right or wrong (I haven't delved into assesing such moral quandrys yet), the borrower is totally a servant to the lender until the debt is paid.
The agreement between lender and borrower is for the lender to repay what was borrowed plus an additional amount to which the two parties consent. The only way for the borrower to fulfill his or her end of the agreement is to give the lender money that legitimately belongs to the borrower (assuming a society that frowns upon stealing from others to pay for your own debts). How does a person legitimately come to possess money?
- a gift from someone else's legitimate wealth
- exchanging a service they provide or a good they produce for someone else's money
The generous owner of existing wealth who gives cash gifts with no strings attached had to have created his wealth at some point; even it if was inherited,
someone had to create it. Which means that, ultimately, someone had to work for it and labor in production. Which means there is no way to pay any debt (whether burdened by an interest rate and miscellaneous fees or not) without someone laboring to create the money wealth used to pay back the amount borrowed.
Money must come from somewhere. Funds used for loan repayment, wages, cash gifts, and in exchange for goods and services rest upon the productive labor of others. Do all these activities create a master-servant relationship?
A few years ago I reached an agreement with a company to buy a bed. Seven and a half years later I paid off the balance of just under $2,000..........all for a bed that cost under $600 to begin with. I think, in the end, that I paid over $6,000 for that mattress. Now, if that ain't being someone else's "servant" or "slave"...............
I don't know your specific financial situation and would rather not delve too much into personal matters. However, surely you knew going into the deal that if you stretched the payment schedule out long enough, the total cost of upholding your end of the deal could exceed the floor price of the mattress. You helped lengthen and strengthen your debt.
Wells Fargo sent me an unsolicited loan check in 2000. It was a full-fledged offer for two grand with all the details and fine print in the envelope. Endorsing the check and cashing it means I consent to the terms and contract with the bank for the loan. It had an original term of something like seven years, the interest rate and total cost of fees were not burdensome, and it just so happened I really wanted to build a new computer. I agreed to the loan and began making monthly payments of a few dozen bucks. By the middle of 2005, I had whittled my principle down to less than $400. During a period of unexpectedly high earnings, I decided to get it over with and pay off the loan in one final check, many months early. I mistakenly forgot to deduct the interest I would have paid on the principle and a week later, Wells Fargo sent me a refund check.
It works both ways, dude. If I had done nothing but made minimum payments, I probably would have paid more than 18% in total interest. However, I made sure to stick in twenty or forty extra dollars with each payment and it made a difference after a few years.
Remember, slavery can be entered into willingly.
Sure, anyone can sign a contract that says from that point until their death they are at the total disposal of the other party. I, however, don't think such contracts are valid or legitimately enforceable. You cannot alienate your will from your body in such a way to hand over title to it. The purpose of such contracts is to supplant your will with the master's and that isn't possible.
Many people sold themselves or their children into slavery. Therefore, slavery does not necessarily require "force", though it often does. Your assumptions on this passage lead me to believe that you think slavery is only entered into unwillingly and I challenge you that any man can enter slavery upon his own will. Free exchange it may be but free exchange does not trump serfdom.
Can we agree that a contract that sells your children into slavery is immoral and void?
I don't dispute that there are examples of people choosing to enter into slavery. However, under what conditions were those choices made? I submit to you that if the consequences of slavery were known to the slave-to-be, very few would take the "offer" unless they were coerced some way, such as with threats or demonstrations of violence or destruction. Clearly such "contracts" are invalid. Even more important is the inner contradiction within the very concept of a slave contract.
Murray Rothbard, in The Ethics of Liberty:
...the right to contract is strictly derivable from the right of private property, and therefore that the only enforceable contracts (i.e., those backed by the sanction of legal coercion) should be those where the failure of one party to abide by the contract implies the theft of property from the other party. In short, a contract should only be enforceable when the failure to fulfill it is an implicit theft of property. But this can only be true if we hold that validly enforceable contracts only exist where title to property has already been transferred, and therefore where the failure to abide by the contract means that the other party's property is retained by the delinquent party, without the consent of the former (implicit theft). Hence, this proper libertarian theory of enforceable contracts has been termed the "title-transfer" theory of contracts.
[...]
...the only valid transfer of title of ownership in the free society is the case where the property is, in fact and in the nature of man, alienable by man. All physical property owned by a person is alienable, i.e., in natural fact it can be given or transferred to the ownership and control of another party. I can give away or sell to another person my shoes, my house, my car, my money, etc. But there are certain vital things which, in natural fact and in the nature of man, are inalienable, i.e., they cannot in fact be alienated, even voluntarily. Specifically, a person cannot alienate his will, more particularly his control over his own mind and body. Each man has control over his own mind and body. Each man has control over his own will and person, and he is, if you wish, "stuck" with that inherent and inalienable ownership. Since his will and control over his own person are inalienable, then so also are his rights to control that person and will. That is the ground for the famous position of the Declaration of Independence that man's natural rights are inalienable; that is, they cannot be surrendered, even if the person wishes to do so.
[...]
Hence, the unenforceability, in libertarian theory, of voluntary slave contracts. Suppose that Smith makes the following agreement with the Jones Corporation: Smith, for the rest of his life, will obey all orders, under whatever conditions, that the Jones Corporation wishes to lay down. Now, in libertarian theory there is nothing to prevent Smith from making this agreement, and from serving the Jones Corporation and from obeying the latter's orders indefinitely. The problem comes when, at some later date, Smith changes his mind and decides to leave. Shall he be held to his former voluntary promise? Our contention - and one that is fortunately upheld under present law - is that Smith's promise was not a valid (i.e., not an enforceable) contract. There is no transfer of title in Smith's agreement, because Smith's control over his own body and will are inalienable. Since that control cannot be alienated, the agreement was not a valid contract, and therefore should not be enforceable. Smith's agreement was a mere promise, which it might be held he is morally obligated to keep, but which should not be legally obligatory.
Emphasis in the original.
A slave contract is a contract to transfer ownership of your will to someone else. I do not believe such a contract is valid because such a transfer cannot occur. Now, I am aware of Walter Block's criticism of this position in A Libertarian Theory of Inalienability (PDF), but haven't analyzed it yet. He thinks that as long as it is voluntarily sold, any free market private property exchange is valid.
Remember too the context of the passage and the time period. A poor family might enter into an agreement for a field or farm. One drought, flood, infestation and everything you own, perhaps even your children, were carted off by the lender when those passages were written.
While you do have a point in mentioning the additional vulnerability faced by the vast majority of people living in antiquity, I'm not moved by it.
It would be trivial to find examples from the beginning of human history all the way to this very moment where people bury themselves in debt to the point where they are in danger of losing all their valuable assets to creditors and collection agencies. I believe today is different in only two respects. First, the state steps in to a far greater extent to provide the welfare safety net to the debtor before, during, and after the debtor's financial collapse in an effort to stave off complete destitution. Second, the general degree of wealth today allows for both a relatively rich standard of living for a significantly lower cost and greater private charity to come to the assistance of the needy.
Remember too that laws regarding interest rates were not in place. People could impose all sorts of fanatical demands on families that did not pay. And the classism that existed when those passages were written were so rampant, the "courts" so injust, that the poor were literally at the mercy of the rich.
Again, I won't deny that unscrupulous lenders existed and royally screwed innocent borrowers. But, as an anarchist, you know state laws don't necessarily result in just or effective outcomes. Making it illegal for lenders to ask for high interest rates (arbitrarily-defined, of course) may stop some mini-tyrants and fraudsters from ruining lives, but it also limits the ability of legitimate lenders to deal with risky borrowers through market exchange. A transient with a P.O. box, a sparse job history, and little capital to put up as collateral is going to raise honest concerns in the mind of the lender and that lender is entirely within his or her right to increase the cost of lending to that person relative to the rate someone with a steady job and plenty fungible assets.
You mention the other thing: there simply wasn't a good justice system back then. Without the checks of a robust litigative process and with the privilege granted to the elites, it isn't surprising to see the poor under the thumb of powerful economic interests. However, that is not a slap against lending in principle, that's a slap against the times and the prevailing political economy. I have little doubt that the economic regulations we face today have precursors in the past that did the same thing they do today: drive people into the arms of authorized/favored bankers and lenders.
Remember that I have not even suggested that interest rates are somehow morally abhorent, yet. All I've suggested, and the conclusion I've given, is that borrowers are "servants", which they are and will continue to be.
I will concede that the essence of a lending contract is for the borrower to perform at least one act in accordance with the lender's wishes, typically the repayment of the loan plus interest and fees. This is fundamentally no different from any other type of economic exchange. Hiring someone involves mutual promises from the employer and the employee. Buying a good involves similar arrangements.
Really, a loan is the conditional sale of present money in exchange for more than that amount in the future. I once again ask you if the spectrum of peaceful exchange that also resembles (if not outright stands in for) creates a master-servant relationship with the dark shades you've drawn in your remarks. Clearly, the authors of the Bible wish to portray lenders as a class, lending as an institution, and interest as an economic tool in a strongly negative light. I disagree on each count because it is the action of individuals that matter and the abuse of their property and reason does not condemn others who engage in their market.
I suppose a good deal of my disagreement with the borrower is servant to the lender is the choice of "servant" to describe borrowers. If a bank required I perform specific activities at certain times or otherwise attempted to micro-manage even a part of my day, I'd consider that worthy of the word. Asking me to pay them $150 next month in exchange for $100 now hardly seems to qualify. I must labor in some manner to pay the full debt, sure, but I've chosen to endure that because I value present money more than future money.
That's the contract, it's in nearly every contract:
"I'll give you $200,000. In exchange you give me a portion of your labor unequal to the cost of doing business."
Why is it crucial to price the service at the cost of doing business? It wouldn't make economic sense to ignore or reject the parties' time preference. Someone convinced the world is about to end will probably be willing to take on a loan with a crushing interest rate. I've already mentioned the constantly varying degrees of risk lenders are willing to endure.
Who is to determine the cost of doing business? From the sense I gather from your comments below, I doubt you (and many others) would trust the lender to be this arbiter. On the other hand, I have a hard time believing the lender will trust the borrower. If neither party in the loan agreement is to judge, by what right does the third party judge and what happens when the parties disagree with that third person's judgment and move on ahead with the contract?
In nearly every business contract the buyer has the upper hand because the seller wants to sell but the buyer doesn't need to buy. In situations with lending it's a bit different because the buyer wants a house, not a loan. That gives the loan officer the upper hand, one of the few situations where the buyer is at a disadvatage.
This also isn't a very moving argument. If the problem is the existence of an "upper hand" when a buyer and a seller meet to exchange, then do you have any criticism for these other business contracts you mention? According to your theory, it seems in those cases the
seller is the one being harmed, screwed, or whatever. It seems that you prefer buyers to have an advantage over sellers. If so, what is your justification for that? I'm not advocating one side possessing an advantage over another, but I'm curious to know why you apparently do.
Borrowing money leaves you in a predicament that isn't easy to escape from.
No, not
per se. People can blindly enter into loan contracts that seem designed to bankrupt the borrower, but if that happened all the time, people would stop borrowing because the consequences suck so much.
Keep in mind, of course, than I'm speaking of the hypothetical ideal: a free market in banking, finance, loans, etc. The competition would be exposed to the unrestricted forces of supply and demand and the individuals in the loan market would benefit accordingly. Obviously, what we see in front of us today and generally throughout history are not examples of free markets but collectivized restricted markets where state intervention has distorted things to funnel business down privileged paths.
The Bible warns against it. In fact, Jews were not allowed to charge interest to other Jews. It was seen as "evil". Muslims follow the same code.
I'm an atheist so these concerns don't really bother me. But, in support of what you're saying, my parents warned me to be extra diligent when thinking of and signing a loan due to the fact that you can get into serious trouble if not prudent.
I'm not oppossed to interest or lenders but I'm wary.
I'm glad you say this because up until now you could forgive me for thinking you thought otherwise.
The contract is never in my favor.
If you truly thought the loan would be more of an expensive burden than a useful financial bump, then why would you enter into the agreement? Weighing the cost to repay the loan against the utility of the principle to be spent immediately is the whole enchilada, the responsibility of the individual trying to decide his or her course of action.
Two, your argument that loans are never in your favor just isn't convincing.
In nearly every business contract the buyer has the upper hand because the seller wants to sell but the buyer doesn't need to buy. In situations with lending it's a bit different because the buyer wants a house, not a loan. That gives the loan officer the upper hand, one of the few situations where the buyer is at a disadvatage.
We don't eat our money. Money has little practical, direct use. We have cash because we can trade it for the things we want. So when you are hired, your goal really isn't to earn money. Your goal is to earn money in order to buy goods and services, such as a house.
Does your theory apply to the employer-employee relationship? Just as with many loans, the person giving you the money (the boss and the lender) is not giving you the ultimate good or service you want; rather, what is given is a means to acquire that good or service. The boss and the lender don't really care if you spend it on a boat, a pistol, a wedding ring, a fancy dinner, or a computer. Both people are giving the money to you on a conditional basis; the boss gives on condition of you doing your work per his or her instructions and the lender on condition of you paying the agreed amount back through the agreed schedule.
I don't see how these middlemen are inherently disadvantageous to borrowers and buyers.
When assessing risk vs. reward in these things I can see I'm clearly at a distinct disadvantage. Sometimes it pays off. I bought a house a couple months ago and I thank my lender for allowing me to do so. But I don't charge TVs or Rings or Clothes.........I'm wary to ring up debt. I think it absurd to commit my own labor to buy something for more than it's worth.
I wish most people would have half your apprehension for racking up debt. Individuals who aren't going to start their own business and who do a great deal more saving than your average person are not as likely to need loans as other people.
One last thing. Your labor isn't permanently fixed at a certain value. It changes over time regarding your circumstances. My hourly asking price has gone up since I left high school, yet I'm not at all opposed to helping a friend or family member for five bucks an hour one weekend. Many people have professional jobs and do volunteer work. After an eight hour shift at work, I often place an escalating price on my leisure time.
Most people prefer present things over future things so it takes more of a unit to equal the value placed on a given amount of that unit. From this perspective, you aren't really getting less for your labor than you'd otherwise. Perhaps it's small consolation, but there it is.
All offered in the spirit of clear and friendly dialogue, Sir.
In mid-2002, U.S. agents uncovered a plot to hit targets on the East Coast. The plotters intended to use hijacked airplanes. By the way, one of the plotters of this caper was also involved in planning 9/11.
