Is Ten Percent Really Enough?

My friend Lina, who lives in Chicago, thinks that 10% is enough, but to be honest, I’ve thought about it long and hard and I’m still not sure that it is.

Let me explain.

Metro Industrial Areas Foundation (Metro IAF), a coalition made up predominately of religious organisations, community groups and some trade unions and covering cities from Chicago to Boston, New York and Charlotte in North Carolina, has launched a campaign, “10 Percent is Enough”, calling for the reinstatement of anti-usury laws and a cap on interest rates at 10%.

Metro IAF argues that the abolition of anti-usury legislation in the early 1980s, the starting point for sweeping deregulation under President Reagan, “helped shift the investment of American capital and talent away from manufacturing and material innovation and into an unproductive financial sector based on trading paper rather than producing long-term wealth.” This has encouraged a growth in predatory lending to the poorest in society that has seen a spiralling of personal debt with interest rates at extortionate levels. For the campaign’s organisers, the issue is therefore a moral as well as a practical one. “Moral and civic prohibitions against usury”, they argue, “stretch back deep into our religious and national history. Our prophets and founding fathers made the clear case long before us that usury is patently wrong, against God, and against our national interest.”

Hoping to be “most exciting social movement to come out of the financial crisis”, the campaign has been taken up in Britain by London Citizens, a coalition that the charity I work for helped to found. In July it held a march to the headquarters of the now publicly-owned Royal Bank of Scotland, to present the chairman of RBS, Sir Philip Hampton, with copies of the Bible, Torah and Qur'an. Two weeks later, it returned for a meeting with RBS executives to press the bank to launch a new low-interest credit card.

Perhaps surprisingly, my reservations about the campaign are not primarily about its overtly religious character, although I can imagine there will be atheists who will uncomfortable with the language and emphasis on religious morality.

In part, this hasn’t been helped by the way the story has been covered by the press, by the unseemly row over the suspension of the rabbi from Bevis Marks Synagogue for participating in the campaign, or the religious connotations associated with the word ‘usury’ (many of them deeply anti-Semitic). Neither has it been helped by the increasingly ludicrous Dr Muhammad Abdul Bari of the Muslim Council of Britain focusing on the rather narrow benefits of “interfaith action”, a subject that the irreligious and, I would imagine, the secular and trade union members of London Citizens care rather less about than the central message about fighting poverty.

But fellow atheists shouldn’t sneer: the motivation behind the campaign comes from genuine concern by compassionate people for the suffering of hundreds of thousands of others. “Our people are hurting”, say Metro IAF, and they should be applauded for demanding action now, rather than waiting and praying for comfort in the ‘next life’.

My problem is that the solution offered by Metro IAF is rather like that most famous graduate of its community organiser training, Barack Obama. It sounds radical but is actually rather conservative.

You see, the global financial crisis wasn’t caused primarily by bankers imposing high rates of interest on credit to borrowers, but rather on their desire to maximise profits by making credit more easily available, even to those who had little prospect of repaying it. In the aftermath of the dot.com bubble and the 11 September 2001 attacks, US interest rates were slashed to 1% to prevent deflation and with the inflow of capital from the booming economies in Asia and the oil producing countries, the banks had money to loan. Credit became easier to obtain but to generate new profits, the US financial sector had to find new borrowers, especially as the traditional mortgage market was exhausted by about 2003. This is why they embarked on increasingly risking lending in the ‘sub-prime’ housing market and in apparently endless personal credit. It was the scale of debt, as much as its cost, which brought about the global financial crisis.

The way to encourage people to spend more is to boost their aspirations to consume more. The desire for a better home, the idea of property as an ‘investment’ (as symbolised by the many appalling ‘Location, Location’ style television programmes), the desperate wish for the right brand or the essential new gadget: never mind whether these were really necessary, or about the impact of our over-consumption on the planet, corporations encouraged us to believe that we needed to consume in order to be happy. Essentially, modern corporate capitalism has as much interest in selling the idea of our personal deficiencies as it does in selling us things we can own. And in the process, we have become more and more disconnected from each other.

This is why it is so disingenuous for those, especially on the US Right, to blame consumer’s greed, or specifically minorities, for the credit crunch to justify the transfer of private-sector losses to taxpayers, as though corporate capitalists had nothing to do with the housing bubble or the explosion in credit and were merely the innocent intermediaries.

This is by far the bigger immorality. And yet this is not one that Metro IAF and its British counterpart seems to have considered. “What we need now,” according to Metro IAF, “more than thousands of pages of new regulations, or the sour faces of executives forced to reduce their eight-figure salaries to a mere seven, is a 10% cap on interest rates,” because “ten percent puts proportion and equity into the relationship between the lender and the borrower. Ten percent restores our capacity to form right relationships.”

This rather like the approach of governments: seeing the financial crisis as just a ‘banking crisis’, saving the banks who got us into this mess in the first place and essentially hoping to return to the way things were, with more stability but otherwise with a system largely unchanged. In the case of most governments, it’s back to a period before the housing bubble. For Metro IAF, it’s back to a period before anti-usury laws were abolished. In neither case does it involve an understanding that there really can be no ‘proportion and equity’ in relationships between lenders and borrowers in a system designed in favour of corporations maximising profit and consumption.

The idea of encouraging the Royal Bank of Scotland – of all the banks – to introduce a new credit card doesn’t challenge the status quo in any way, but that doesn’t mean that other radical solutions can’t be found, ones that the compassionate people involved in Metro IAF and London Citizens can get behind. The financial crisis offers a unique opportunity not to save the banks, but to change them forever. This can mean radically de-merging the banking sector, wholesale nationalisation, the development of grassroots trading alternatives, local banking based on cooperative principles, or even practical ideas for new forms of local money, as Douglas Rushkoff advocates (see his fascinating video below).

My own view is that these ideas may just be stop-gaps and that neo-libealism needs a far more wide-ranging overhaul, one where the sour-faced executives find their eight-figure salaries reduced to zero. But these ideas are still more ambitious than the objective sought by the ‘10% is Enough’ campaign.

I have no doubt whatsoever that the campaign has the very best of intentions, but considering the predicament that millions of people all over the world have been placed in by the global financial sector, ten percent is simply nowhere near enough.

Life Inc. The Movie from Douglas Rushkoff on Vimeo.