Bank Credit-Systems As an Exploitation Mechanism in Aggravating Income/Wealth Inequality

What is it about?

A recent Oxfam International Report (2017) revealed that world inequality is greater than was feared and that 62 people own as much as half the people on the planet. This case-study research paper offers an account of Sri Lankan credit culture where: a) powerful credit decision-makers justify their irrational credit decisions by masquerading as patriots or as socially responsible business people; and, b) an influential credit applicant was successful in obtaining credit while an ordinary credit applicant was treated differently. These observations bolster the Marxian claim that credit systems work as an exploitation mechanism towards concentration of wealth and enhance the social power-bases of the rich. This paper argues that: a) credit decisions support and enhance the economic power of influential individuals and that such economic power supplements their social power – this, in turn, reinforces the propensity to make preferential credit decisions towards influential credit applicants, thereby making them even richer and more powerful; b) ordinary credit applicants are discriminated against by strict application of credit evaluation rules; c) therefore, the credit mechanism and a strengthening socio-economic powerbase of a capitalist class are two co-integrated, mutually reinforcing functions which, by an intensifying exploitation mechanism, aggravates inequity in society.

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Photo by Sushil Nash on Unsplash

Photo by Sushil Nash on Unsplash

Why is it important?

A recent Oxfam International Report (2017) revealed that world inequality is greater than was feared and that 62 people own as much as half the people on the planet. This case-study research paper offers an account of Sri Lankan credit culture where: a) powerful credit decision-makers justify their irrational credit decisions by masquerading as patriots or as socially responsible business people; and, b) an influential credit applicant was successful in obtaining credit while an ordinary credit applicant was treated differently. These observations bolster the Marxian claim that credit systems work as an exploitation mechanism towards concentration of wealth and enhance the social power-bases of the rich. This paper argues that: a) credit decisions support and enhance the economic power of influential individuals and that such economic power supplements their social power – this, in turn, reinforces the propensity to make preferential credit decisions towards influential credit applicants, thereby making them even richer and more powerful; b) ordinary credit applicants are discriminated against by strict application of credit evaluation rules; c) therefore, the credit mechanism and a strengthening socio-economic powerbase of a capitalist class are two co-integrated, mutually reinforcing functions which, by an intensifying exploitation mechanism, aggravates inequity in society.

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