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Is debt a moral issue?

Come to think of it, is anything a moral issue in these amoral times? How behavior has changed in the last one hundred years! In the early 20th century, society was very different in the UK. Two admonitions which parents impressed on their children as they grew up were to avoid having sex before marriage and not to get into debt. Although it could be said that the first of these rules (strictures, warnings, advice – whatever way you want to describe it) was more honoured in the breach than in the observance, the second rule commanded a bit more respect and indeed obedience, if you like.

Debt was to be avoided, like the plague, so there was no need for debt advice. It was especially so for women. Women after all often administered the household budget and did so with pride and fiscal rectitude. It was a question of honour – to be able to look anyone in the face, not owing a penny!

And then along came credit! Or rather, then came hire purchase (HP). In the early years it was frowned upon, especially by the older generation of people who believed that if you couldn’t pay for it, you didn’t buy it. After HP made its appearance, consumer credit began to mushroom. Every citizen (practically) had to have an overdraft although many did not need to and indeed many did not avail of them, preferring to keep their current accounts in credit.

Personal loans, term loans, motor loans and all sorts of unsecured credit facilities began to appear and the beauty of it all was that you didn’t need to have any assets to back up your loan applications – hence the term unsecured credit. All you needed was income. Once you could show that you were earning regularly, the credit institutions were only too eager to lend to you. Credit cards including store cards soon followed and very quickly they became seemingly essential. Forget about Shakespeare’s old advice ‘Neither a borrower nor a lender be!’ but espouse the new philosophy ‘Buy Now, Pay Later!’

Today everyone is a borrower, almost in the same way that we are (all?) sinners. It’s a part of the human condition. We cannot help it. Even if we are struggling to repay our lenders, we are not ashamed. Even if we cannot repay our lenders not only are we not ashamed, we are often angry – with our creditors – for lending us the money in the first place! How crazy is that? We feel ripped off by having to pay exorbitant interest rates and penalties, by the aggression of debt collectors and loan sharks but probably most of all by our loss of control of our finances. We are, if you like, just mad at ourselves. How could we have let this happen? Surely, we could have avoided it. If only we had realized in time that yes, debt is a moral hazard, we would have avoided the temptation of borrowing. Shakespeare was surely a wise man.

Paddy Byrne 08/02/2011

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