Minister of Science and Chief Protector of the Faith

Tuesday, September 19, 2006

"Are there no work houses? Are there no Prisons?"

A Modest Proposal: The Free Market Solution to the US Household Debt Problem–Debtors’ Prisons
By Jane Burns
September 17, 2006

A Modest Proposal: The Free Market Solution to the US Household Debt Problem–Debtors’ PrisonsAs the real estate bubble deflates and credit card interest inflates, it’s time to consider a dynamic new engine for America’s service economy—debtors’ prisons, the next logical step in a free-market economy in which easy credit has freed more us from the burden of saving and allowed us to experience "the good life." But unfortunately many of us have failed to take responsibility for our financial choices. We borrowed too much and then declared bankruptcy, blithely erasing our obligations and leaving our lenders holding the bag.

[...] Consider, for instance, the many American homeowners now struggling to make rising monthly payments on their adjustable rate mortgages, or those who took out second mortgages in the expectation of continually rising home values. If they have a financial setback and can’t make their payments, they may lose their homes. And if, because of falling real estate prices, what they owe exceeds the value of their homes, their problems are compounded because they have a so-called underwater mortgage.

Are there no work houses? Are there no Prisons?[...] Some homeless debtors with strong work ethics will persevere in earning a legal living and servicing their debt. But others will engage in "underground" cash-only economic activities such as begging and thus avoid attachment of their wages. The availability of homeless shelters, where debtors may come and go as they please, plus the provision of free nourishment in many municipal parks, will encourage this irresponsible behavior.

But why should homeless debtors loaf in shelters and parks when they can be working off their debt in prison, contributing to the economy, while also creating thousands of badly needed jobs? The weepy-wipers who warn of "social chaos" as the noose of falling real estate prices and bankruptcy reform tightens in America fail to understand that free markets thrive on "creative destruction," a concept introduced by economist Joseph Schumpeter in 1942. The free market always has the answer. In short, from the ashes of ten million ruined American households, a thousand debtors’ prisons can arise to carry the economy forward inexorably to its next stage of rapid expansion. [...]


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