Squeezing the Poor for Profit

Two days ago was Blog Action Day, a day where nearly 13,000 bloggers committed to raising awareness of the issue of poverty and helping initiate action.  The site itself is an amazing collection of thoughts, commentary, and action points on fighting poverty. What makes it unique, though, is that the initiative encouraged bloggers and sites to raise awareness in ways that fell in line with their audience and natural content. Tech sites were encouraged to share how technology can affect poverty.  Sports sites were encouraged to talk about the charity efforts of players, teams and organizations.

One of the sites I follow, Business Pundit, ran a great article as a part of Blog Action Day entitled “Squeezing the Poor for Profit” which addressed the darker side of the capitalistic spirit that got us in the mess we’re in economically today. Good food for thought:

I’m not sure what poverty really means in the United States, but I do know that a segment of our population is poorly educated when it comes to money. We all now know about the subprime mortgage market. We’ve heard how unscrupulous lenders set unsuspecting buyers up with confusing terms and optimistic promises of increasing real estate value. But what about smaller debt. In recent years, a wide range of businesses have offered financing to even the riskiest of borrowers. Inflated interest rates combined with foreclosures have proved a cash cow for some. ...

According to a 2007 Business Week article by Brian Grow and Keith Epstein:

In 1989 households earning $30,000 or less a year paid an average annual interest rate on auto loans that was 16.8% higher than what households earning more than $90,000 a year paid. By 2004 the discrepancy had soared to 56.1%.

From 1989 through 2004, the total amount owed by households earning $30,000 or less a year has grown 247%, to $691 billion, according to the most recent Federal Reserve data available.

Is this capitalism? Something is off. I know no one forces the poor or anyone else into living beyond their means, but surely we can do a better job of educating the public about money and finance. Don’t you think?

Posted 10.17.2008

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