A solution for subprime deadbeats

May 6, 2008

In over your head with rapidly increasing monthly payments? One would go to debtor’s prison for not making mortgage payments. There’s still a debtor’s prison standing in Virginia. The catch-22 for being sent to prison was, you had to stay there until your debts were paid, but the how could you earn money to pay your debts if you were locked up? So, often people died in prison.

You can still thrown in jail for not paying up in certain circumstances, like child support and alimony.

This commentator would like to bring the prisons’ back:

Years ago, this country did away with debtors prisons.  The nation in general, and poor people in particular, would be well served to bring them back.

The harm to business from unpaid debt, and the reduced productivity and even business failure unpaid debt can bring, is obvious.  Businesses or individuals who are not repaid the money they loaned or who are not paid for the goods or services they produced and sold on credit are prevented from accumulating needed and even expected capital for expansion, and they are frequently thrown into serious financial constraints making it hard to pay their own creditors and employees.  This not only can theoretically choke the gross national product, many recessions and even the Great Depression have been in fact brought on at least partly by unpaid debt.

But debt relief measures, either in the form of actual debt forgiveness or in the form of relaxed procedures to collect debt (including the abolition of debtors prisons), are generally thought to help the poor.  The idea that once again forcing poor people into involuntary servitude to pay for meager food and shelter is certainly a tough sell.  But here goes.

A return to debtors prisons would help poor people in at least five ways: 1) increasing workforce participation; 2) increasing personal responsibility; 3) making it easier for the poor to climb the economic ladder through entrepreneurship; 4) reintroduction of the virtues which have proven the only reliable way of the poor to leave poverty; 5) making credit more readily available.

What would life be like in debtor’s prison. Here’s a glimpse:

The debtors invariably saw themselves as incarcerated for a short time only, until their affairs could be sorted out, the misunderstandings with the creditors clarified. Dickens wrote in The Pickwick Papers:

Many eyes, that have long since been closed in the grave, have looked around upon that scene lightly enough, when entering the gate of the old Marshalsea Prison for the first time: for despair seldom comes with the first severe shock of misfortune. A man has confidence in untried friends, he remembers the many offers of service so freely made by his boon companions when he wanted them not; he has hope — the hope of happy inexperience … How soon have those same eyes, deeply sunken in the head, glared from faces wasted with famine, and sallow from confinement, in days when it was no figure of speech to say that debtors rotted in prison, with no hope of release, and no prospect of liberty.[12]

The anonymous eyewitness reports that new prisoners entering the Marshalsea became “witness to the various methods of time-killing, viz. drinking, singing, gambling, fornication, adultery, and, in short, every kind of debauchery.”

The presence of wives, lovers, daughters, and prostitutes was taken for granted at the Marshalsea. Women were allowed to come and go, and even live with the prisoners, without being asked who they were, if they behaved themselves.[64] The anonymous eyewitness reports that some of the rooms were specifically let out for use by prostitutes.

If you are lucky enough to get out of prison, then you would wind up literally in the workhouse or the poorhouse. Jack London can fill you in on the details:

It being plain that as a poor young man with a family I could rent no houses at all in this most undesirable region, I next looked for rooms, unfurnished rooms, in which I could store my wife and babies and chattels. There were not many, but I found them, usually in the singular, for one appears to be considered sufficient for a poor man’s family in which to cook and eat and sleep. When I asked for two rooms, the sublettees looked at me very much in the manner, I imagine, that a certain personage looked at Oliver Twist when he asked for more.

Not only was one room deemed sufficient for a poor man and his family, but I learned that many families, occupying single rooms, had so much space to spare as to be able to take in a lodger or two. When such rooms can be rented for from 75 cents to $1.50 per week, it is a fair conclusion that a lodger with references should obtain floor space for, say from 15 to 25 cents. He may even be able to board with the sublettees for a few shillings more. This, however, I failed to inquire into–a reprehensible error on my part, considering that I was working on the basis of a hypothetical family.

Not only did the houses I investigated have no bath-tubs, but I learned that there were no bath-tubs in all the thousands of houses I had seen. Under the circumstances, with my wife and babies and a couple of lodgers suffering from the too-great spaciousness of one room, taking a bath in a tin wash basin would be an unfeasible undertaking. But, it seems, the compensation comes in with the saving of soap, so all’s well, and God’s still in heaven. Besides, so beautiful is the adjustment of all things in this world, here in East London it rains nearly every day, and, willy-nilly, our baths would be on tap upon the street.

True, the sanitation of the places I visited was wretched. From the imperfect sewage and drainage, defective traps, poor ventilation, dampness, and general foulness, I might expect my wife and babies speedily to be attacked by diphtheria, croup, typhoid, erysipelas, blood poisoning, bronchitis, pneumonia, consumption, and various kindred disorders. Certainly the death-rate would be exceedingly high. But observe again the beauty of the adjustment. The most rational act for a poor man in East London with a large family is to get rid of it; the conditions in East London are such that they will get rid of the large family for him. Of course, there is the chance that he may perish in the process. Adjustment is not so apparent in this event; but it is there, somewhere, I am sure. And when discovered it will prove to be a very beautiful and subtle adjustment, or else the whole scheme goes awry and something is wrong.


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