Capitalism, as we all know, is a dandy system for creating wealth, but it
doesn't do squat for social justice. No reason to expect it to -- that's not
its job. Its moral imperative is: "Buy low, sell high."
Of course, there are corporate chieftains with social conscience, and many
companies do a great deal of good in their communities beyond providing
employment and making good widgets. But as we are so often reminded by
heroes like "Chainsaw Al" Dunlop, a CEO's job is to increase corporate
profits on behalf of the shareholders, period.
Unregulated capitalism is not a pretty sight, which is why we have labor
laws, environmental regulations, health and safety standards, unions,
much-eroded consumer protection laws, and other checks on the system.
Barring a few glitches, like the fact that corporations keep buying our
government, this is not a bad deal for lots of us, and it's not capitalism's
job to help those who don't have enough power to deal with the system.
It would be helpful, however (from a PR standpoint if nothing else), if
corporations would quit picking on poor people in particular.
The latest example of this practice comes from the drug industry, which is
charging higher prices to uninsured customers than to people with insurance.
President Clinton released a study Monday showing that elderly people
without insurance -- that's half of all seniors -- pay 15 percent more than
people with insurance for the same medicine. Furthermore, this gap has
doubled in the past four years.
Clinton is pushing for Medicare coverage of prescription drugs and so plans
to hold a big-deal conference this summer about how pharmaceutical companies
set their prices. The drug industry could stand investigation on several
fronts, including its charming practice of contributing enough money to
members of Congress to get them to extend the patents that allow the
companies to charge ridiculous prices; but that's another story. What we're
concerned with here is the practice of preying on the poor.
The Poor Pay More" is the title of an old book about such abuses, and as
Ralph Nader observed recently, the title is just as true today as it was
when the book was written 30 years ago.
In fact, the financial industry is so given to preying on the poor that Fed
Chairman Alan Greenspan, of all people, made a speech last month against
predatory lending. Greenspan, Boy Populist. Good grief.
Predatory lending is practiced by mortgage and home-equity companies that
seek out low-income borrowers and then charge them excessively high fees and
interest without disclosing what those rates are. The result is that the
borrowers end up with unaffordable payments, they lose their equity and the
banks foreclose on their homes.
Another form of legal robbery is "payday lending," a practice that makes
mob loan sharks look good. The Public Interest Research Group and the
Consumer Federation have been bird-dogging this industry; they report that
the payday lenders are charging interests rates of 300 percent or more. Not
only that, but they are stepping up their lobbying efforts to weaken state
laws preventing usury by forming alliances with national banks.
In Texas, where payday lending is prohibited, the lenders are partnering
with banks and thrifts that claim they don't have to comply with state
interest-rate ceilings. Nationally, the average APR is 474 percent for a
two-week loan, according to the report. Most payday lenders interviewed for
the report either failed to quote an APR, denied that an APR applied to the
loan or wrongly quoted the low two-week rate rather than the correct annual
rate.
In a typical payday loan, a consumer writes a personal check for $115 to
borrow $100 for two weeks -- until payday. The APR on this loan is 390
percent. At the end of two weeks, the consumer often "rolls the loan over,"
or pays an additional $15 to carry it for two more weeks, thus paying $30
for a $100 loan.
It's not just big business that rips off poor people. An oldie but goodie
is practiced by furniture and appliance stores that sell to people who
cannot pay cash. They "rent to own," often charging two or three times the
cash price for a refrigerator or a sofa under exorbitant lease agreements.
A newie but goodie is auto title pawn, where a car owner pawns the title to
the car in exchange for cash. The interest rate on this pawn can be
astronomical -- sometimes more than 900 percent APR. Naturally, if the
consumer falls behind on the monthly loan, the car will be repo-ed, no
matter how much has already been paid on the loan.
Another revolting development lies in arbitration clauses. According to the
National Consumer Law Center, "Creditors and merchants are increasingly
inserting clauses into the fine print of their contracts that prohibit
consumers from filing lawsuits, and force all disputes to mandatory
arbitration hearings. Arbitration clauses are carefully drafted to stack the
deck against the consumer: They allow companies to select the arbitrators,
arrange for the arbitration in places convenient for the companies but not
the consumer, forbid class actions, limit discovery and prohibit recoveries
such as punitive damages and attorney's fees."
There are many other examples of this kind of legal ripping off of poor
folks. If our legally corrupted legislatures allow it to continue, it's all
going to give capitalism a very bad name.
Molly Ivins is a columnist for the Fort Worth Star-Telegram. To find out more about Molly Ivins and read features by other Creators Syndicate writers
and cartoonists, visit the Creators Syndicate web page at www.creators.com.
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