Shays' Rebellion and Bankruptcy "Reform"
Shays' Rebellion was a sort of aftershock of the American Revolution. The farmers of western Massachusetts were deeply disappointed that independence didn't end their financial problems, and in 1785 many of them took arms to stop the state courts from collecting debts. They seemed to believe that the cause of their distress was oppression by money men from Boston. Really their problem was the same combination of poor technology and too many children that has always been the curse of humanity, coupled with their rather foolish attempt to live as grain farmers on land better suited for growing rocks. The rebellion collapsed after a failed attempt to capture the arsenal at Springfield, and rebels had no better luck in the next year's elections. Conservatives have always enjoyed scaring people with the specter of populist politicians seizing the nation's wealth and distributing it among their followers, but for whatever reason that has never happened in America, and Shays' Rebellion remains a sort of quixotic footnote to a history dominated by capitalism and compromise.
Though the rebels' economics was faulty, I'm not sure their politics was so far off. I realize that making this claim puts me in unsavory company. My efforts to research the rebellion online led me to essays posted from The Institute for Historical Revision and other far-right groups, who see Shays' rebels as precursors to their own anti-government, anti-establishment radicalism. But so be it; not even Hitler was wrong about everything. What angered the leaders of Shays' Rebellion was the intervention of the government to support the power and privilege of the commercial elite, by jailing farmers who couldn't pay their debts. And, really, what business does a democratic government have jailing people to help the wealthy collect debts? Government, it seems to me, should be on the side of the people who elected it. It is on this point that I think Captain Shays and his rebels were right, and the establishment men who opposed them corruptly wrong.
You may be thinking that even libertarians believe one of the functions of government is to enforce contracts, and since the debts owed by those farmers were contracts freely entered on, helping to collect them was the government's business if anything was. That was George Washington's view. Yet I think to understand the real role of debt in human affairs requires a very long view and a very broad perspective. It is the normal state of human affairs, wherever you look and whatever period you choose, that societies are run by a small number of the rich and powerful. One of the main ways these elites establish and maintain themselves is by getting their neighbors into debt. Visit a village in India or Indonesia and you will find that the poor, almost without exception, owe money to the rich, and if you observe the political scene you will notice that these debts are among the main chains holding the poor in the service of their betters. Those debts may have been, for all I know, as freely contracted as those of 18th-century farmers, but that does not make them any less evil. When poor farmers are in trouble, their families face starvation, and sometimes the only way they can feed their children is by mortgaging their land. If they are very lucky, they may have a run of good years and be able to redeem that mortgage, but most likely they will remain in debt, and under the power of their bankers, for the rest of their lives, and they will probably pass those debts on to their children. Appeal to the government is useless and always has been, because the government, dominated by the landlords, takes the line that a contract is a contract and the peasants should have known what they were getting into when they put their marks on those mortgages. The government, in the guise of upholding the law, connives in the oppression of the poor by the rich, as almost all governments have since government was invented.
Which brings me to the bankruptcy "reform" recently passed by both the Senate and the House and soon to become U.S. law. The point of this reform, we are told, is to make it harder for spendthrifts to wipe out their debts and move on. This strikes many people as simple justice; hey, they borrowed the money, so they should pay it back. To let them off the hook is unfair to both the people who lent them the money and to the majority of borrowers, who pay their loans no matter how much it hurts them. But, I ask, what business does the government have using its police powers to help rich banks take money from people in financial trouble? I cry no tears for these banks. They do everything they can to entice people to borrow money, whether those people can afford to pay it back or not. One of the main reasons bankruptcy is becoming more popular is that many banks will lend even to people who have already done it once; e-mails arrive in my box every day saying "No credit too bad! Bankruptcy no problem!" Oh, the poor bankers; they need government relief to protect them from their own foolishness and greed.
Most Americans in debt are hardly in the position of Indonesian villagers, and most did not take out their debts to avoid starvation. But almost everybody faces hard choices, and it is a simple fact that when faced with the choice of borrowing money or telling your ten-year-old she can't have a birthday party like her friends', most people will get out the credit card. The trillions of dollars of consumer debt run up by Americans are testimony to the power of immediate desires to outrun both cash in hand and concern for the future. If I were a hard-nosed "realist", I would say, see, most people really are sheep, and the dominance of the strong is just an inevitable part of the human condition, no matter what kind of government you have. Fools who would sell their freedom for birthday parties and new cars are just getting what they deserve.
I despise this kind of reasoning, and I think it misses the whole point of democracy. Democracy is supposed to make the system work as well as possible for most of the people; and if there are ways in which the people are sheep, then it is not the job of the government to help the wolves into the fold. I think 24% interest rates are unconscionable, and I think they ought to be illegal. I would rather my government didn't lift a finger to help these loan sharks collect their ill-gotten gains. The banks should police the system themselves, by refusing to lend to people who can't or won't pay it back, and the government should get involved only in cases when the system is flagrantly abused by clever spendthrifts. Credit and debt may be crucial parts of the modern economy, but they are also age-old tools of oppression, and all decisions about government policy ought to be made with that history in mind.
Daniel Shays, where are you now?
"Ask not, 'Why were the former days better than these?' for it is not from wisdom that you ask this."