Credit and Debt: A World of Trouble?

Although this blog writer is not a trained economist, patterns can be discerned. Debt, credit, and product are the means to power and control for a select group of people in the world. The history and development of the Western Hemisphere easily illustrates this. Most modern societies are built upon credit: the good kind known as investment and the bad kind known as debt.

During the initial expansion of the British Empire, the West Indies developed faster than the colonies of North America because they produced sugar, a more valuable consumer product. These businesses in responding to an established market demand, and anticipated consistent increased production were solid investments to which European banks willingly extended long term credit. On the other hand, while Virginia and Maryland planters produced two qualities of tobacco, these crops never approached the clamor for sugar. Because of this, their capital credit was limited until cotton growing took root as the staple of the southern economy. Cotton, a raw product of North America, “fed” the European Industrial Revolution and provided another means to accumulate wealth and extend credit based upon slave labor.

Traffic in African slavery euphemistically described in US history curricula as the “triangular trade” was based on access to African labor underwritten through banks and investment credit. What is missing is the acknowledgement that banks and these investors made out like bandits! They owned the companies that initially traded the Africans to the planters. The planters essentially “sharecropped” by purchasing land and enslaved people to produce crops promised as payment at a market price often determined by the investor upon delivery.

In familiar sharecropping terms investors and banks “furnished” the planters with the means to produce crops, but under this system many planters including George Washington and Thomas Jefferson eventually went under. Additionally, based on future profits, this same group of bankers, investors and merchants extended credit to the Western Hemisphere for their European products.

One of the first major markets that adjusted to “Buy American” was the buying and selling of Black people. By banning importation of Africans to the US after 1809, Virginia, Maryland, Delaware, and North Carolina began to meet the increasing demand for slaves by marketing their workers and their offspring. They became the major suppliers of unpaid laborers as fertility rates improved; they became breeding grounds sending increasing numbers into the southern frontiers of Georgia, Alabama, Mississippi, Louisiana and Texas. This did not change the format, but merely switched the primary beneficiaries of slavery from Europe to America.

The economic theory that higher demand decreases unit price is supported by the reality that planters in the West Indies paid less for Africans because they purchased more enslaved workers than those in mainland North America. Observing all this profitable commercial activity Parliament chose to reap financial benefits by adding shipping, port and embargo taxes on all trading, in and out of the British Empire. In effect Parliament created a consumer tax and business tariff on everything and everyone as a means to protect national industries and investors, and provide the government with a means to generate revenue. These taxes grouped under Stamp Act legislation were the initial sparks that ignited colonial alarm. Colonists resisted these measure and eventually their rebellion led to separation from England.

Now, we take this a few steps further in describing our economic history. How does a capital institution maintain control of wealth and property? Simple – debt. Thomas Jefferson, acutely familiar with personal debt, created a national policy in the early 19th Century to insure permanent and irreconcilable debt of Native Americans. He instructed and required that American products and goods be traded at military outposts bordering Indian territories. Within a decade by encouraging this trade and providing easy credit for guns, clothing, trinkets, grain, cloth and liquor the tribes bordering these frontier areas were completely in debt, and the only payment accepted by the US government was land. That was how the mid-West was “won.” It was conquered by debt. Then, it was simply a matter of subsidy and homesteading to permit Europeans and Americans to lay claim to these “foreclosures.” No one served as financial adviser, translated or interpreted the fine print for Native Americans. By the time Tecumseh realized the tactic, it was already too late to reverse. Could this be described as conventional business methods, laissez faire or conspiracy?

From its beginning this nation was built upon floating debt and manipulating personal credit, debt and servitude (limited or lifetime). There has been little or no commitment to the distribution of wealth or leveling the field to guarantee universal access to opportunity.

A home mortgage is essentially a rental contract; a car purchase is a lease agreement; and for many, a child’s college education funded through a lifetime loan is the only possible financial option to obtain credentialing. Indentured servitude was only discarded when African slavery became a more profitable option. Debtor and prison colonies (Australia, Georgia, New Orleans) were European attempts to monopolize labor and take advantage of individuals and groups who were in debt and lacked access or the ability to use information or knowledge to their benefit. Sound familiar?

Information technology is the new factor, the new variable. Rapid communication via electronic media has facilitated the “Arab Spring,” elections in Russia, protests in Syria, “Occupy” demonstrations in the US and Europe. Knowledge and information define today’s power and sharing it quickly makes it volatile and beyond control. It is hoped that revising social and economic frameworks will benefit all of us on a global scale. That is a real challenge for this next generation. We do not envy young people their task. Best wishes in the coming years!

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