I need to tell you about John (not his real name). He is a Cameroonian immigrant who came to the U.S. on a student visa. He waited tables in a popular pub in downtown Houston to earn a little change and support himself through school. Hardworking, courteous, and gregarious, John wears the most infectious and charming smile you have ever seen.
It didn’t take long for him to get noticed by the club’s high rollers, who reciprocated his friendly disposition with hefty tips. Weeks rolled into months, and John was living his best American dream. But something happened. He joined this fraternity on campus, notorious for being loud and tastelessly showy. To cement his new status, he acquired a Mercedes convertible — top tier and with a sunroof. Then COVID hit, big tips dried up, and life happened to John … quickly.
I got to know John’s story from a friend who had brought him to ask if one could be of any help. Faced with an eviction notice for two months of unpaid rent and threatened with repossession of his Benz for the same reason, he took the worst but the only option left for him: a payday loan.
Taking a payday loan is another way of asking the devil to help you in America. You know you will eventually get destroyed but hope to live for at least one more day. John got a $500 loan at a 400 percent interest rate plus a $55 loan processing fee. All was due in two weeks.
At loan maturity, John found himself owing $2,555 in debt. But that’s not all. Another month ended quickly, and both his house rent and car note were due. The problem was his monthly earnings couldn’t even cover the loan, let alone pay for groceries and other sundry living expenses. Needless to say, at this point, he had to pause school.
When John showed up, I was seriously torn between empathy for this kid for whom the post-COVID economy had dealt a tough hand and my natural aversion for those who love to keep up with the Joneses and drown in conspicuous consumption. But the intervention from this piece is not about John. It’s about the hefty price of living poor, whether for an individual or a country.
America is the world’s largest economy today but ranks 17th in the Human Development Index (HDI), which in layman’s terms, measures a country’s standard of living. That’s because a thousand Elon Musks worth a gazillion dollars can’t compensate for a good chunk of Americans living under the bridge. The income inequality in America today is as wide as the Gulf of Mexico.
The Nordic countries of Norway, Iceland, Denmark, Finland, and Sweden offer great examples in terms of bridging this gap. In these countries, income inequality is at the barest minimum. They rank the highest in HDI, with Norway always leading the pack. Little wonder crime is almost non-existent there, and Iceland has the lowest crime rate anywhere in the world.
Poor citizens are easy prey for payday lenders, and most live like John.
Children of those living in poverty are likely to miss out on preventative health and may not develop their full economic potential later in life. This continues the vicious cycle of poverty, which is a breeding ground for crime. A society high in crime will require the government to devote more resources toward law enforcement. The cycle continues. No wonder America has the highest incarceration rate in the world, with more than two million prisoners nationwide.
The evidence is overwhelming and suggests that inequality significantly contributes to poverty and its consequences. Poverty perpetuates a cycle of poor health, low education, and crime. These, in turn, increase the cost of health care, education, and law enforcement.
Oh! And you want to know what happened to John? He is still struggling to stay afloat and is barely scraping by to this day. Unfortunately for him, America does not suffer fools gladly.
Osmund Agbo is a pulmonary physician.