Ever wonder why you get so many credit card offers from banks in South Dakota? You know, those loud envelopes with low introductory APR’s that turn around and clobber you with 25% interest rates a few months later? Rates that bury folks in debt, just like the arid storms that buried much of South Dakota in the Dust Bowl era of the ’30’s? This is one of the many mysteries explained by David Graeber in his book “Debt,” about which I also posted on 2/14 and 2/22.
Sometimes shitty situations go on for so long they come to seem “natural,” as if things have always and must always be the way they are. Being someone who got my first credit card in the early 1990’s, this is the way I have looked at the exorbitant interest rates credit card companies charge their customers. I didn’t look at it that way anymore after I got to the part of this book that has to do with the many ways in which the world economy changed circa 1980, the transitional moment the band Great Plains once sang about in their song “The End of The Seventies.”
In 1980, the Federal Government passed the “Depository Deregulation and Monetary Control Act,” which “struck down all federal usury laws, ostensibly, in reaction to the rampant inflation of the late 1970’s, though of course they were never restored when inflation was brought back under control, as it has in the last quarter-century.” (Debt, p. 452) The laws wiped off the books had restricted rates of interest to between 7 and 10%. This use of a moment of economic crisis to ram through “emergency measures” that benefit what we now call the 1% at the expense of the 99% is the practice Naomi Klein has referred to as “The Shock Doctrine.” In a less economically fraught climate, this bill probably would not have made it through Congress. Once it did, the only limits on rates of interest that remained were those maintained by the states. But banks could avoid these measures of consumer protection by establishing headquarters in states that had no such laws on the books – states like South Dakota.
Citibank was one of many institutions that worked the gears of the state capitol building in Pierre to lucrative effect. In 1981, they purchased a credit card company and set up a subsidiary in South Dakota that took advantage of state laws that allowed them to charge up to 25% rates of annual interest, then the highest in the nation. Today, the good times only roll faster for Citibank and their financial sector neighbors in South Dakota. There are currently no limits at all on the interest rates these companies can charge. Interest rates of 25, 50 and even 120%, (in the case of the “payday loan” industry,) came on the scene. This had previously been considered a criminal activity known as loansharking, associated primarily with the mafia. The judges, bailiffs and police of South Dakota and other states that followed similar strategies started to take on a function Graeber compares to the Mafia’s traditional collection agency of “hired goons and the sort of people who place mutilated corpses on their victims’ doorsteps.”
South Dakota has seen similar patterns of migration before. The Black Hills Gold Rush of 1874 began after a military expedition led by General Custer found gold in territory the Treaty of Laramie had recognized as belonging to the Sioux and other Native Americans in 1868. As thousands of fortune seekers arrived on the scene after Custer broadcast his discovery to the public, the government’s promises to the Sioux were jettisoned – much like the promises the government’s usury laws had made to US citizens prior to 1980.
The resulting chaos has been staged for the small screen by the HBO series Deadwood of 2004-6, which focuses on the transformation of that South Dakota town from a camp to boomtown over the course of the 1870s. The larger arc of the show has to do with the control powerful men like the California mining magnate George Hearst eventually exert over smaller local power brokers like the saloon owner and pimp Al Swearengen, who arrived soon after the miners did.
The founding of gold rush towns like Deadwood displaced Native Americans with the same violence that characterized the earlier 1849 gold rush that founded the city of San Francisco as we know it today. Viewers can relive that moment of national glory by watching Deadwood on DVD. The following scene depicts a fight to the death between Seth Bullock, the sheriff of Deadwood, and a Sioux Indian who assaults him for intruding on a native burial ground. The kind of pride this spectacle fosters in some viewers may be seen in the first comment on this clip on You Tube, which simply reads “White Power.”
Today, there are gold rushes of different kinds everywhere. Graeber locates the 1980 repeal of federal usury laws in the context of a strategy Reagan and Thatcher came up with to manufacture consent for their practice of rolling back the hard-won gains of the labor movement. As they busted unions and promoted business practices that took pension plans and benefits away from workers, they expanded access to credit in order to make it seem like the average citizen was getting something back in return. It became easier to borrow money through things like credit cards, and mortgages that turned homes as ATMs. (Graber notes that this popular cliche is a misnomer: such mortgages actually functioned more like giant credit cards.) 401 (k) retirement accounts were among several ways in which the average person was encouraged to invest their money on Wall Street. Graber characterizes this as a process in which “everyone could become rentiers – effectively, grab a chunk of the profits generated by their increasingly dramatic rates of exploitation.” The resulting mentality is so ingrained by now that it has become something that people are born into.
In the short term, the benefits are immediate – flat screen TVs, DVD players, homes, and other commodities are – or were – easier to get than they were before 1980. While a few strike it rich under the current legal framework, in the long run, most end up buried in debt as the interest payments associated with this easy credit pile up, especially in an economic downturn such as the one we remain mired in today.
It wasn’t much different in 1849 in California, or in 1874 in South Dakota. A lucky few struck it rich in the gold rush, much as George Hearst did in Nevada in 1859. The future father of William Randolph Hearst, (the publishing magnate portrayed by the film Citizen Kane,) made his first fortune by hauling 4.5m (in 2011 dollars) worth of silver across the Sierras to San Francisco. The Ophir Mine he worked was part of the Comstock Lode rush that centered around the first discovery of silver ore in the United States. It was the first major rush that followed the 1849 California one. Today, the birthplace of the Hearst Castle and other accoutrements of the family empire lies in ruins.
Hearst was the exception to the rule. Most of the prospectors in California, Nevada and South Dakota were left with dust in their pans. Many of the small time winners succumbed eventually, like Warren Beatty’s character does at the end of the 1971 film McCabe & Mrs. Miller. The film follows the same progression as the series Deadwood. McCabe, a gambler, & Mrs Miller, a prostitute, become partners in a brothel and saloon near a zinc mine in Washington state in the early 1900’s Once they establish themselves as a money-making proposition, representatives of the Harrison Shaughnessy Company arrive who want to buy out their business and the surrounding mines. McCabe brushes their initial offer off with a folk saying the baseball skipper Jimy Williams once used on the day he was introduced as the new manager of the Boston Red Sox in 1997: “Now, if a frog had wings, he wouldn’t bump his ass so much, now would he?” The company representative is not amused. He calls McCabe “a real smart ass,” and leaves to begin the next stage of negotiations, which will be carried out by three bounty hunters who arrive in town soon after his departure.
Mrs. Miller thinks they should sell, in light of the company’s reputation for killing people who refuse their advances. She tells her partner that the men coming to town – one of whom they are told is 7 feet tall – “are paid for killing, nothing else.” Beatty’s character is too stubborn to heed her warnings. He seems equally threatened by her business sense and their intimate relationship, (“I ain’t never let anyone this close to me before.”) He dismisses her advice by telling her, “well, I guess if a man’s fool enough to get in business with a woman, she ain’t gonna think much of him.”
In the eventual gun battle, McCabe manages to shoot two of the bounty hunters in the back in a fashion that departs from the honor code of the typical High-Noon style Western showdown. In that ’50’s classic, Gary Cooper calls out the name of his adversary – “Miller!” – before jumping around a corner to shoot him. McCabe offers no such fair warning.
McCabe survives first wound he suffers, but not the second. He ends up struggling against drifts of snow that eventually bury him, like the dust that buries the wagon wheels in the Dust Bowl picture at the top of this post. Meanwhile, Mrs. Miller escapes into an opium pipe as the rest of the townspeople celebrate the success of their efforts to put out the fire in the church that was sparked by the first eruption of the gunfight. No one takes an interest in the outcome of the actual fight itself. The final shot of the film shows the round edge of the pipe’s balloon in such a way as to make it look like a shot of the earth’s atmosphere taken from outer space. Her perspective seems to make the instrument of her addiction a metaphor for the state of the world she is caught up in throughout the film, in which everyone is trying to escape from a trap that lures people in with promises of easy prosperity.