“The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another” — Milton Friedman
Why hasn’t our free market sufficiently handled the current economic crisis? Didn’t the daily highs in the major indices and the record low unemployment indicate we had the strongest economy—well, ever? Yet weeks before any political leader had issued “stay in place orders,” stock prices began to tumble thousands of points a day. What does it take for chief financial officers and boards of directors to realize that restructuring and accepting some sacrifice in the short term could produce better outcomes in the long term?
The best answer is that we don’t live in a free market.
I could recite a litany of examples for evidence, but I will focus on how the immensity of the impending consumer debt crisis acts as a millstone around the neck of the economy. To better understand the complexity of our enormous system, I offer a simpler situation. Consider the case of a landlord with one hundred tenants. Each month the tenants must pay rent. If one tenant loses her job and can’t pay, the landlord can evict her and get another tenant. Even if no one fills the apartment, the landlord will patiently wait for another tenant or perhaps raise the rents on the others slightly to make the same profit. Now, this could work for two or five or maybe ten tenants who lose their jobs and can’t pay. But what happens when fifty tenants can’t pay? Isn’t there a point where even the landlord will fail to make ends meet?
In November 2019, CNN reported that American debt was over $14 trillion. The largest amounts owed are on mortgages, student loans, credit cards, automobile loans, and medical bills. Let’s consider the effect on the common good these millstones pose.
Mortgage debt, not inherently troublesome, makes up the majority. Yet, while most homeowners can afford their monthly payments, the poor will be more likely to default during the coming recession. In a free market, lenders would recognize the value of allowing low income borrowers to defer their payments to the end of loans at no cost. Instead, banks will act to protect their bottom line leading to large-scale foreclosures, where evicted homeowners will leave houses empty and unattended. Thousands of people suddenly homeless will delay recovery in the market as people scramble to find new accommodations instead of looking to purchase goods and services.
The next major contributor to the debt is student loans; according to U.S. News and World Report, 94 percent of student loan debt is owed to the federal government. Recent college graduates struggling to pay their loans are the ones society depends on to get married and have families to sustain our population for the future. The New York Times recently noted that the age women have their first child has shifted higher—while researchers have found that female happiness has declined. Overwhelming college debt could increase that gap, ultimately threatening family life in America.
Another problem is how credit card debt and automobile loans have become critical to American life. Even before the recent increase in unemployment, almost 5 percent of debt repayment was delinquent. What will happen when unemployment balloons in the coming months? In a free market, banks issuing credit would want to avoid the complete loss of accounts due to a bankruptcy epidemic that might ensue. Similarly, auto manufacturers and their lending partners wouldn’t want to repossess a bunch of cars that they would not be able to sell because no one would have any money. Creditors typically respond, however, with even higher, patently usurious, rates on unpaid bills to make up for defaults. We don’t need more injustice.
The free market solution would be for the owners of all the debt to turn to the biblical principle of a debt jubilee found in Leviticus 25: “But if they do not acquire the means to repay, what was sold will remain in the possession of the buyer until the Year of Jubilee. It will be returned in the Jubilee, and they can then go back to their property.”
What good is all the wealth of the world if there is a global shutdown? MarketWatch reports that 70 percent of the wealth is owned by 10 percent of Americans who have a minimum net worth of at least $1 million. Much of that wealth is based on securities derived from the debt of a large chunk of poor Americans and businesses. The economic depression we may now be facing will lead to widespread bankruptcy. This will lead to massive cuts in bonds anyway, but bankruptcy ruins credit, which is necessary for our economic system.
Thus, the problem of debt isn’t only about what’s good for the poor. We are necessarily talking about solidarity, the understanding that we are in this crisis together. Michael Hudson tackled the issue of a debt jubilee in a Washington Post column on March 21, asserting it is the only way out of the possibility of a global recession.
We could debate the numbers, negotiate timelines, posit risk reward scenarios, and the like. But we should begin to discuss seriously the need for a jubilee, following Christian principles that have largely been lost by the fracturing of the American political landscape.
The first, as we said, is solidarity. Nothing has demonstrated the world’s interconnectedness better than COVID-19, and everyone stands to lose from inaction and mounting debt. We all stand to gain in the long term, however, from debt forgiveness.
The second is subsidiarity. The larger the scale of our debt, the more powerful the central authority must be to maintain order. Resetting the scales would allow lower jurisdictions to handle financial concerns without having to turn to a more authoritarian entity. Low-income families suddenly freed from debt service bondage could make decisions on their own without help from the government. Local and state entities could handle their own issues without turning to the feds.
Pope Francis called for a Jubilee Year of Mercy back in 2015. Witnessing political and economic leaders working towards financial mercy would encourage everyone to consider the idea of forgiveness. We have slogged through an increasingly ugly quagmire of vitriol and enmity in our political system. In an era of forgiveness, we could forge a new Christian political witness that rejects a focus on negative statements like, “You are not a Christian if…” and, instead, promote a common good approach toward our high-minded ideals.
As Milton Friedman observed, “Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.”
The weight of the system has kept us from advancing in new directions with “ideas that are lying around.” We cling to an economy that evaluates the market by GDP instead of benefit to mankind. We should all consider how human ingenuity and a just market could lead us down a better road. This could open the door for more discussions about things like why we are stuck in an arcane employer-based healthcare system and why we haven’t changed the way we educate our children.
The question for the faithful is whether we can accept with humility that our love of comfort and prosperity has made us numb to the Gospel message. As Christ Himself said, “You shall love the Lord your God with all your heart, with all your soul, with all your mind, and with all your strength. This is the first commandment. And the second, like it, is this: You shall love your neighbor as yourself. There is no commandment greater than these.”
Of course, there will be those who spent their lives wisely scrimping and saving, and who (understandably) feel put out by the idea of the poor and profligate being given an advantage which they themselves never enjoyed. All I can say to them is that we must resist the temptation to be like the elder brother in the parable of the Prodigal Son—angry that our brothers would be forgiven their debts when we have worked hard to earn our livelihoods. Instead, we should rejoice that those who once were dead are alive again. Only then can we love one another as Christ has loved us.
Image: Moses Brings out Water from the Rock by Bernardino Luini