Say you come to my door and tell me that it’s been a cold winter; your heating bills were higher than you expected. Still, the kids need Christmas and could i please lend you just a few hundred dollars to get you into the new year.
We talk a little about your financial situation: it’s not great and it’s not getting better. You work a lot of hours, but…well, the boss on morning shift isn’t going to forgive your tiredness just because you worked the night shift for somebody else. Everything keeps going, but just barely. Seems like every few months there’s an unexpected bill that rattles the whole system; you like to think the kids don’t notice, but they’re bright kids. They made honor roll.
I explain that i don’t know you very well; i’m a generous man, but i can only afford to be generous because i am also thrifty. I’ll offer you a loan, but i can’t do it for free. I’ll do it fairly, of course, but you’ll need to pay a little more later if you want your money today. Because…well, i don’t know you, and you might not pay anything later.
Obviously, i’m going to help you. But as sad as your story was, it makes you a bad risk. You care more about feeding your children than you care about paying me back, and your financial situation means you’ll probably need to make that decision at some point.
So I need to charge an awful lot for the loan. If you want five hundred in time for Christmas, you’ll need to pay back five-fifty by Easter. I charge everyone who comes to my door that rate: about one in fifteen just skip town, and this price means that i can keep offering a helping hand forever.
Sure, you’re paying for some deadbeats and drug addicts who preyed on my sympathy and naivete and took a loan without ever intending to repay it. But you’re also restoring my faith in people when you gladly agree to pitch in a little more than you take out. That’s what i’m doing.
I worked hard for years to get this money i’m lending you. I think i earned this money, and my business partners, my customers, my coworkers, my bosses, and my government all agree. I know you work hard, too. You work as hard as i ever did. But if our roles were reversed, if I were coming to your door…well, you would do the same as me, or you’d be quickly bankrupt and we’d both need to find a new door to knock.
I do take a small cut, about five dollars for each loan I make. But i enjoy my quiet life and five dollars seems like a fair price for this conversation. This is not exactly work, i’ve enjoyed talking to you and getting to know you. But perhaps i would have prefered to spend this time speaking to my wife instead of a stranger who would like to borrow money.
You accept my terms. We sign papers and part ways. We both feel fine, we both feel
that everything has been fair. You spoke your needs, and i spoke mine; we found that we would both be happier together than we would be alone, and we consented to a partnership for our mutual advantage.
Around Valentine’s Day, you come back to my door. Your car broke down. Without the car, you can’t get to work and if you can’t get to work you can’t get the money to pay me. You plied the mechanic with your sob story and got him down to parts-and-labor, but he’s still gotta buy the parts and pay the labor. Any lower would take money from him, personally, and it hasn’t been a good year.
So can I lend you what you need? You’ve saved three fifty intended to pay down the loan i made you, so you’d need an extension plus another four fifty to get you by.
Naturally, i let you borrow the money. You need it to pay back the remaining two hundred, first of all; that makes it a sound business decision.
But now you owe me one thousand dollars, which is not what i had intended. I try to keep my loans under six hundred dollars, as a rather strict rule: too much to any one person presents a variety of financial and moral risks, most of which are simple common sense.
So this has escalated into a large favor. And i need to charge you more than i usually would. I would prefer to refuse your request outright, it seems to me that you will be unable to pay back this much money. But you asked and…well, i helped you once and i feel responsible now.
So we draw up a payment plan. You say you can make twenty dollars a week, and you’re willing to make seventy weekly payments. Yes, that means that you will be paying a total of four hundred and fifty dollars over and above what you ever borrowed. But now i need to meet with you seventy times to to collect your weekly payment: about six dollars per meeting is a fair price for my time.
We agree on penalties for missed payments
We agree that, while unfortunate, this deal is fair. Cars break, and unexpected
expenses do come up; you’re not wrong to ask for the loan. And I didn’t break your car, but i am the only person willing to pay to get it fixed; i’m not wrong to ask you to pay a little for the service. We shake hands, neither feeling mistreated.
This was, after all, a deal we agreed to as free people. It is both terribly sad and terribly unfair that your car broke down, we agree on that. But it’s wonderful that there was somewhere for you to turn in your hour of need. You will never understand how much i hate charging these fees and this interest, but it does cost me sleep. Even so, i want to help everyone, and i would go bankrupt if i didn’t charge for my loans.
Now that you are paying me twenty dollars a week, you have a little less breathing room in your budget. There’s no saving for the next storm when you’re stuck paying down the last one. You cut a few luxuries, but it doesn’t seem to help. The kids rebelled when you cut the cable; it’s harder to keep them entertained, they take a little more time and a little more money.
The kids get the flu, you miss a few days of work taking care of them. A few more when they give it to you and you can’t drag yourself out of bed. Obviously, you miss a few payments to me. I keep charging interest, assigning small fees.
The pattern continues; eventually you borrow small sums instead of repaying. Obviously, this is not a long-term solution for either of us.
Now twenty dollars a week doesn’t pay down the interest. Even with each payment you make, you owe more.
You agreed to these terms, and i could not have offered better ones. Not if i intend to continue offering fair and timely loans to needy people for the rest of my life.
And, honestly, i am becoming tired of dealing with you. You have taken up so much of my time, and have taken so much of my money. That time and that money was intended for other people who would have paid it back as agreed. I am sympathetic to your situation, but this is becoming frustrating for me.
You asked me for a loan, not a gift. True, i would not have given you five hundred dollars. But i may have given you five, perhaps fifty if my mood were good. What you asked for, though, was a loan. We agreed to a loan, and yet you are not paying it back.
I conduct myself honestly in my business dealings; i surround myself with people who do the same. When i was earning the money that i lent you, i made it a point to do every single thing that i promised i would do. I understood that i could not earn a reputation as a fair man without being fair, and i realized that i could not become what i wanted to be without that reputation. You knew to come to my door because everyone knows that i am a fair man who can be counted on during the worst of times.
I do not like my own frustration with your inability to pay what you’ve promised. But i am not the one you are robbing: i need the money that you owe to make more loans. For all the shared pain that we both have surrounding this loan, for all the dark emotion and the mutual feeling of deep betrayal, i was there for you when you needed me. And i would like to be there for the next person who needs me; it is important to me that i be able to continue offering these loans, i believe that they help people.
If you don’t pay me, that means that i will eventually need to turn someone away. If enough people don’t repay me, i will become hardened and cynical and cease offering help at all.
I do not offer forgiveness of your loans; you have not shown that you are committed to upholding your word, and until you show that commitment…well, it won’t seem like you have earned any amnesty.
And this goes on and on. You make the payments you can, and are charged for the payments you miss. You borrowed one thousand dollars five years ago, and in spite of the two thousand you’ve paid back in that time you still owe me three thousand dollars.
You can only earn so much per hour, and there are only so many hours in the day. It takes more and more of your time, your energy, your life merely to keep even with the interest. Soon, interest takes up your entire paycheck. Soon, it would take up your entire paycheck if you worked every second of every day.
You could get a raise, perhaps. But that is unlikely, as tired as you are. Working on four hours sleep, you run the risk of seeming drunk. Merely keeping the jobs you have takes all you can give; getting an education, or another job, feels like a remote fantasy.
And still the sum grows, and grows and grows.
And now, all these years later; after all the fees and all the interest; now that you have paid many, many times what you ever borrowed and owe me many, many times what you’ve paid; now that i am the rightful, legal owner of everything you could ever hope to produce; now, I have a question for you.
When, exactly, did I make you my slave?