Results of the Consumer Credit Protection Act

Andrew Schwartz — Wed, 10 Mar 2010 01:35:00 GMT

Thanks to the CCPA that has put an overwhelming amount of new regulation on the Credit Card industry, I have received a letter from my Credit Provider with the following good news:

My current APR of Prime Rate + 6.65% has changed. It is now locked at 9.9% (the Prime Rate is at 3.25% and has been for quite some time) for the next 30 days!

After that thirty days is up, my NEW rate will be... The Prime Rate + 6.65%...

It seems this new regulation has forced my Credit Card company to notify me of this absolutely meaningless (to me) change because "some of the new rules limit our ability to manage our credit card business the way we do today. As a result, we're adjusting the interest rate calculation on all of our credit card accounts..." Thus, they are required to notify me of changes, even though none really were made to mine. Who knows how much money this company lost just sending out the countless statements to people in a similar situation...

What they did raise was the balance transfer fees, cash advance fees, and foreign transaction fees. All of these were previously 0% across the board, but now they are 3%, 3% and 1% respectively. My late payment was also raised from $25 to $35. Like I said, these don't really apply to me because, like many [smart] consumers, I only use my credit card for necessary purchases and immediately pay the balance. One has to wonder [not very hard, mind you] if they have raised these rates just to make up for the losses they incur by preparing and sending out these mandatory pointless letters.

The 'Progress' of our Purpose: Aspects of the Market Revolution in the North and South

Andrew Schwartz — Tue, 09 Mar 2010 20:47:00 GMT

To the scrupulous and proactive, the Market Revolution would have very much worked in favor of their individual endeavors. A wise observer of the inclinations of man and the warnings of history would have seen that the expansion of credit is not infinitely elastic. To the reckless speculators and emotional opportunists the Market Revolution may have brought short-term gains, but those who foolishly believed that the expansion of money is the same as the expansion of wealth would eventually realize a costly education in the cycles of business; the optimist alternately reviles and reveres the pessimist.

For a typical New England farm family, the distant sight of urban expansion and industrialism must have been both concerning and exciting. Surely they watched with a grave anticipation as nascent suburbs would begin crawling toward the agrarian areas, but they also knew that an expansion in population would raise demand for their inelastic commodity. In the short term and long term, a rural farmer would have benefitted more from the Market Revolution and the expansion of urban consolidation.

In the short term they could adjust prices of their lagging supply to meet the growing demand of opulent consumers. In the long term the city’s population, despite their economic conditions, would always need to import food to their cobblestone courtyards and brownstone buildings. The agrarian is more immune to the fluctuations of capitalism than are the commercial centers. Rothbard points out that “farm employment is not a markedly cyclical phenomenon. Furthermore, many farm households were self-sufficient, and carried on only local barter trade, or entered the monetary nexus occasionally.”[1] The advantage of being a farmer is that his economic master is nature—the production and yield of his goods and the sustenance of his existence are determined only by his skill and the weather, not the fickle desires of the consumer. This is also the disadvantage.

For the merchant living in Boston, however, he was not allowed the blissful social abandonment and relative economic immunity that the farmer had. To sustain his livelihood he must have engaged daily in the cacophony of commerce, tabulating and calculating the wants and needs of a perpetually changing population and then determining the most cost-effective way to fulfill their—and his—desires. A keen merchant observer would have been ecstatic to see the loose-money policies of The Bank of The United States. The central Bank, who “was second to none in the scramble for profits,” also led the way in inflationary policies, or at the very least failed to prevent them.[2] Easy lending meant easy borrowing, which in turn meant easy spending. The only portion of the economic cycle that was not easy, however, was that of the fundamental repayment of debt.

The wise merchant would have taken full advantage of this burgeoning expansion of credit by borrowing at a low interest rate to temporarily expand his business without increasing overhead costs. He would have considered (if I may be so draconian) people as the commodity that they are—that employee value is in an economic expansion determined by efficiency and in a recession determined by pliability. In very nearly all cases in the Panic of 1819 (and in all crashes), the institution or the individual who borrowed more wealth than he was capable of producing according to his own stability was the same who was affected negatively by the turns of fortune. The Casino of Commerce was the venue and the pessimists were the House.

One industry in New England that flourished despite the defaults in banks and the ups and downs of commerce was that of the emerging textiles. England, with her abundance of sheep and labor, had dominated the textile market for decades, and the newly independent United States received a majority of her clothing material from her former guardian.[3] The martial endeavors from 1812 to 1815—and as a result, the economic embargoes—of each nation forced Americans to find a new supplier of textiles, the most economical of which was within her own borders.

England had previously been able to maintain a virtual monopoly on the export of textiles due to their harnessing of hydrodynamic production. To maintain this control, they had not only embargoed the machines themselves but the technology—the intellectual property—from other countries’ exploitation. Nevertheless, a state can regulate property, but it will never succeed in regulating intellect; the technology soon fell into the hands of Frances Lowell.

In a true capitalist fashion, Frances Lowell exploited the situations around him to advance his own interest. Seeing a growing demand for cloth and other textiles, he successfully led the United States into the Industrial Revolution. As with any businessman, he was an expansionist for his clientele and a protectionist for his product. During the Panic of 1819, he sought protective measures for the textile industry he created against the cheaper products of India.[4] But he also understood the value of inexpensive labor. Six years before the Panic he formed his company and took advantage of the relative labor shortage by offering wages to a—by contemporary context—socially inferior class: Women.

Using hydrodynamic technology, productive labor was no longer limited by load-bearing capacity or physical exertion. Skill could be defined by finesse and accuracy instead of strength; innovation had begun to supplant the inequalities of biology. Lowell recognized this potential and took full advantage of it.[5] The comparable wages of a factory woman was far greater than many other lines of (reputable) work, so the desire and demands for employment was at an optimal mutuality. (To illustrate, while the wages for a female manufacturer was between $2.50 and $3.00 per week, this had the purchasing power of approximately $500-$600 per week in 2009 dollars. This would average out to about $7.15-$8.55 per hour (70 hours/week)—and this does not count the benefit of dormitory residence and chaperoned (securitized) living. While hardly lucrative, it is comparable to today’s standard wages for unskilled labor.) Lowell would economically seduce rural and inferior women to the luxuries and liberties of capitalism, and they in turn would grow accustomed to their relative equality and independence; eventually, they would demand and achieve nothing less. The irony of History once again shows that the equality of inferiors is made possible by the inequalities of the superior.

Perhaps the most socially inferior class throughout this time though was in the South. In addition to the apparent cultural and biological inequalities that women had to endure, the slave had to suffer the prejudice of a perceived inferior capacity—for intellect, for morals, and for trust; it was these inequalities that technology could not erase. The fruits of slaves’ labors were in almost no way their own. Perhaps some might gain a little favor with their master in exchange for extraordinary efficiency and productivity, but there was no expectation of it and there certainly wasn’t any requirement by any visible or invisible hand to bestow it. If a slave was afforded the privilege of education and news, the Missouri Compromise (1820) would certainly have brought despair to him. The admission of one more slave state, based in part on the enumerating of “property,” seemed to shift the balance of power more dangerously towards a compromised political equality and geographic polarization. Slaves might have also seen that “Southerners were unwilling to pass legislation for the benefit of the industrial States, perceiving that the growth of industry would bring a preponderance of power to the North.”[7]

The production of cotton in the south, however, cannot be discounted. It was the plantations of the south that exported large amounts of cotton to the north. Without that commodity, Lowell’s (and others’) proto-feminist mills would have been largely moot. Just as women’s work created wealth for men, it was the slaves’ work that created wealth for women. It is difficult to attribute the advent of minority industrialization to New England women when considering the contributors to the industry of that region were industrial minorities in the south. Whitney’s Cotton Gin (1793), while crude and still operated by hand, at once eliminated the tedium of manually separating the seed from the fiber and expanded the tedium of manually separating of the boll from the bract. Between 1800 and 1809, the South grew its cotton exports by over 600%, and by 1820 exports were approaching 1000% of pre-gin production. “Both the southern ‘lords of the lash’ and the northern ‘lords of the loom’ depended on large numbers of slaves to grow cotton.”[9]

It was because of the Gin that plantation owners were able to move from the coastal rice swamps and islands of South Carolina to a more interior location where enormous plantations could be cultivated without the discontiguities of hydrography;[10] while New England was harnessing the power of water, Carolina was abandoning its limitations. Because of the vastness of these new plantations and the growing demand for cotton from New England, the slave’s labor intensified exponentially, transferring from the goal-oriented “task system” to the time-oriented “gang system”.[11] In these regards there were few, if any, advantages for the slave during the Market Revolution. However, the Market Revolution did indirectly contribute to the end of slavery. As one example, William Lloyd Garrison and his abolitionist movement’s success was inextricably a product of the New England market economy and his Liberator publications “epitomized ‘the vanguard of capitalist liberalism.’”[12] In the end, perhaps, slavery and the system of merchant capitalism in the south was hoisted by its own petard; for without the southern supply, the northern demands would have no growth.

The Market Revolution brought an unprecedented amount of wealth to many in a relatively short time. The entire nation seemed obsessed with treasure seeking—some by speculation, some by divination.[13] The individual sought to realize independence, just as the nation in which he lived recently did. The means for the pursuit of wealth or stability were innumerable. A few engaged in real estate speculation; others speculated the desires of consumers; some invested in technology, both the failed and successful kind; several gained their wealth by the exploitation of the vulnerable; the rest sought wealth and power through supernatural means. Today, however, real estate speculation has recently—before its burst—been praised as the most profitable venture; advertisements endlessly encourage consumers to participate in the economy; technology and innovation are still divided into failures and successes, and are largely enabled by investment; the vulnerable who are exploited are simply beyond our borders or out of immediate sight; and the rest consult their seer stone in the stock market and their divination rod in the lottery and casinos. Perhaps “progress” is only a prideful boast of every generation, and we, “who repeatedly enlarge our instrumentalities without improving our purpose,”[14] are destined to eternally orbit around the selfish desires of our nature.

[1] Rothbard, Murray. The Panic of 1819: Reactions and Policies. Auburn, AL: The Ludwig Von Mises Institute, 2007—p.27.

[2] Morison, Samuel E., Oxford History of the American People., New York: Oxford University Press, 1965—p.403.

[3] —Rothbard. The Panic of 1819…—p. 3

[4] —Ibid.—pp. 209-211

[5] —Morison. Oxford History of the American People…—p. 483

Measuring Worth. Relative Value of US Dollars. (2010). http://www.measuringworth.com/calculators/uscompare/ (accessed Feb 01, 2010).

[7] Hesseltine, William B., A History of the South, New York: Prentice Hall, 1936—p.211

Ibid.—p.191-192.

[9] Jones, et al., Created Equal, New York: Pearson Longman, 2008—p.259

[10] —Hesseltine. A History of the South…—p.192-193

[11] —Jones, et al., Created Equal…—p.229, 254-257.

[12] Augusta Rohrbach. “‘Truth Stronger and Stranger Than Fiction’: Reexamining William Lloyd Garrison's Liberator.” American Literature 73, no. 4 (2001): 727-755. http://muse.jhu.edu.proxy.lib.odu.edu/ (accessed Feb 2, 2009).

[13] For a comparison of supernatural treasure seeking in the Market Revolution see: Taylor, Alan. "Treasure Seeking in the Northeast." American Quarterly 38, no. 1 (Spring 1986): 6-34.

[14] Durant, Will. The Lessons of History. New York: Simon and Schuster, 1968—p. 95