Democracy Versus Mob Rule

Democracy Versus Mob Rule
By Thomas Sowell
11/2/2011

In various cities across the country, mobs of mostly young, mostly incoherent, often noisy and sometimes violent demonstrators are making themselves a major nuisance.

Meanwhile, many in the media are practically gushing over these "protesters," and giving them the free publicity they crave for themselves and their cause -- whatever that is, beyond venting their emotions on television.

Members of the mobs apparently believe that other people, who are working while they are out trashing the streets, should be forced to subsidize their college education -- and apparently the president of the United States thinks so too.

But if these loud mouths' inability to put together a coherent line of thought is any indication of their education, the taxpayers should demand their money back for having that money wasted on them for years in the public schools.

Sloppy words and sloppy thinking often go together, both in the mobs and in the media that are covering them. It is common, for example, to hear in the media how some "protesters" were arrested. But anyone who reads this column regularly knows that I protest against all sorts of things -- and don't get arrested.

The difference is that I don't block traffic, join mobs sleeping overnight in parks or urinate in the street. If the media cannot distinguish between protesting and disturbing the peace, then their education may also have wasted a lot of taxpayers' money.

Among the favorite sloppy words used by the shrill mobs in the streets is "Wall Street greed." But even if you think people in Wall Street, or anywhere else, are making more money than they deserve, "greed" is no explanation whatever.

"Greed" says how much you want. But you can become the greediest person on earth and that will not increase your pay in the slightest. It is what other people pay you that increases your income.

If the government has been sending too much of the taxpayers' money to people in Wall Street -- or anywhere else -- then the irresponsibility or corruption of politicians is the problem. "Occupy Wall Street" hooligans should be occupying Pennsylvania Avenue in Washington.

Maybe some of the bankers or financiers should have turned down the millions and billions that politicians were offering them. But sainthood is no more common in Wall Street than on Pennsylvania Avenue -- or in the media or academia, for that matter.

Actually, some banks did try to refuse the government bailout money, to avoid the interference with their business that they knew would come with it. But the feds insisted -- and federal regulators' power to create big financial problems for banks made it hard to say no. The feds made them an offer they couldn't refuse.

People who cannot distinguish between democracy and mob rule may fall for the idea that the hooligans in the street represent the 99 percent who are protesting about the "greed" of the one percent. But these hooligans are less than one percent and they are grossly violating the rights of vastly larger numbers of people who have to put up with their trashing of the streets by day and their noise that keeps working people awake at night.

As for the "top one percent" in income that attract so much attention, angst and denunciation, there is always going to be a top one percent, unless everybody has the same income. That top one percent has no more monopoly on sainthood or villainy than people in any other bracket.

Moreover, that top one percent does not consist of the "millionaires and billionaires" that Barack Obama talks about. You don't even have to make half a million dollars to be in the top one percent.

Moreover, this is not an enduring class of people. Nor are people in other income brackets. Most of the people in the top one percent at any given time are there for only one year. Anyone who sells an average home in San Francisco can get into the top one percent in income -- for that year. Other one-time spikes in income account for most of the people in that top one percent.

But such plain facts carry little weight amid the heady rhetoric and mindless emotions of the mob and the media.
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Payday Loans
By Thomas Sowell
11/1/2011

California is a great place for studying the thinking -- or lack of thinking -- on the political left.

The mindset of the left was recently displayed in a big, front-page story in the October 30th issue of the San Mateo County Times. It was an investigative reporter's expose of the "payday loan" business and its lobbyists.

According to the reporter: "In California lenders charge up to $45 in fees on a maximum $300 loan. This amounts to an interest rate of 460 percent, trapping some borrowers into a never-ending cycle of debt."

Let's take this one step at a time. Whatever the merits or demerits of the rest of the argument, $45 is not going to trap anyone in a never-ending cycle of debt, even if they are making only the bare minimum wage. Personal irresponsibility in managing money can trap anyone, but that is regardless of whether or not they take out payday loans.

Now to the 460 percent rate of interest. You don't need higher math to figure out that $45 is 15 percent of $300. How did we get to 460 percent? Very simple: By distorting the actual conditions of most payday loans.

As the name might suggest, payday loans are short-term loans to tide people over until they get their next check, whether a salary check, a welfare check or whatever. Payday loans are relatively small sums of money borrowed for very short periods of time, often by low-income people who want some cash right now, for whatever reason.

Is it worth paying the $45 to get the $300 right now, rather than wait a couple of weeks for your check to arrive?

No third party can know that. But taking decisions out of the hands of those most directly affected is one of the central patterns of the political left that make them dangerous to the very people they think they are helping. This is not idealism. It is arrogance -- and too often, it is ignorant arrogance, as in this case.

The 460 percent figure comes from imagining that the borrower is not just going to borrow the money for a couple of weeks, but is going to keep on borrowing every couple of weeks all year long.

Using this kind of reasoning -- or lack of reasoning -- you could quote the price of salmon as $15,000 a ton or say a hotel room rents for $36,000 a year, when no consumer buys a ton of salmon and few people stay in a hotel room all year. It is clever propaganda, but do people buy newspapers to be propagandized?

What about the $45 that is at the heart of all this runaway rhetoric? Does that do more than cover the risk and the costs of processing the loan? Apparently our crusading investigative reporter did not find that worth investigating, even in a long article taking up another page and a half inside the newspaper.

What is called "interest" by the media includes things that an economist would not call interest. The fees charged must also cover the cost of processing the loan, which is to say the pay of people doing the work, the rent of the premises and other overhead expenses, as well as the risk of default.

But mundane facts like these would spoil the moral melodrama, starring the reporter on the side of the angels against the forces of evil.

Instead, we get the story of how the payday loan industry, like most other industries, has lobbyists contributing money to politicians to try to get spared more regulations. This the investigative reporter calls "protecting" the payday loan industry.

Protecting them from what? From the politicians. Some would call their campaign donations "protection money," in the same sense in which the Mafia collects protection money.

None of this is peculiar to this industry, to California or to our times. When Al Gore was Vice-President of the United States, he phoned businesses from the White House to tell them how much money he expected them to contribute to political campaigns.

Franklin D. Roosevelt's son extorted a $200,000 loan from a grocery chain that was under federal investigation -- and he never repaid the loan. Moreover, FDR spoke directly to the head of the chain to seal the deal.

There are not a lot of angels to be on the side of.
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