Summary

In proposition we remain confident that we have won this debate. Tragically for them, the Lithuanian bunch have argued themselves into a theoretical knot devoid of clarity and common sense. In proposition, we have stuck to the fundamentals, and demonstrated three substantive lines of analysis, on which this debate surely turns: FIRST, is there a problem? SECOND, is the proposed mechanism an effective answer to the problem? THIRD, are there additional considerations supporting, or militating against, the proposition’s policy proposal? The problem, as we have consistently argued and demonstrated, is that high interest rates that lead to odious personal debt leave the borrower, the bank, and in the end society, worse off. Opposition’s callous response has simply been that the emotional and financial loss that a borrower would suffer is outweighed by them making an informed choice. This ignores, as we pointed out, the patent lack of effective freedom that destitution – especially in the current economic climate – imposes on a borrower. Knowing you are acting under conditions of perfect information staring you in the face is small comfort when desperation motivates self-destructive financial imprudence. Opposition also contended that the banks are not facing a genuine problem here at all: they simply accommodate for risk with a high premium. My goodness! Did Team Lithuania not hear of a banking crisis that started, in part, because of unserviced, and unserviceable, debt? Banks, and borrowers, are therefore FATALLY susceptible to financial and emotional (on the part of borrowers) loss in a high interest rate environment. Add to this the 3rd agent in the equation, that not-so-abstract beast called ‘society’, and it is VERY CLEAR that proposition has laid out a genuine, and timely problem: dangerous levels of interest rates that license unjustifiably risky personal loans. So, on this first major point of contention, proposition comes out stronger. The solution we proposed (note - not the ONLY solution to ALL the economic problems we currently face) is a cap of 20% interest on personal loans. Opposition, fresh from econ 101 lectures on some planet unrelated to the Earth, scoffed at the mechanism on two grounds, if you strip the rest of the theoretical knot of its superflouous density: First, they claimed that banks will lose out because a) they will not lend to anyone and b) they will bemoan their inability to make returns on high risk loans; and second, borrowers of all credit histories will no longer be able to access loans. These retorts to our mechanism have not outlived the debate round. Two reasons: a 20% cap on interest rates still make lending a profitable business; and it is utter nonsense to pretend that risk profiling will suddenly result in ALL, or even most, would-be lenders coming out not qualifying for loans. Team proposition never once suggested a price-setting system, and, so long as the interest rate remains under 20 per cent, the government will have no input whatsoever into the setting of interest rates. At worst – or best, in fact – the loan conditions, and the magnitude of the loans, will be more prudently set, and negotiated, safeguarding both the long-term interests of banks and borrowers alike. Last, are there other extraneous facts beyond our core analysis that impact the case? Opp thought so: 1) claiming that even if we made some gains in improving this aspect of banking, this has sweet nothing to do with recessions; and 2) belatedly claiming that, if anything, low interest rates started a recession. These were desperate attempts to stay in the debate. First, we EXCPLICITLY stated that we are not pretending to guarantee that our mechanism will prevent another global recession. We claimed, and still do, that we are tackling one of the many elements that drove the recession: irresponsible lending mechanisms. Given that inability to service debt partly led to the US housing market collapse, our contention that the problem in this debate is PARTLY constitutive of the bigger problem – though not wholly constitutive of the bigger problem– is clearly correct. Second, it is overzealous to remind us that more than one cause led to the crisis e.g. derivatives. That simply ignores a concession we already made in the context-description of the debate some 72 hours agol! Lithuania should have read carefully rather than imputing a false burden to us. What they SHOULD have proven is that our mechanism will not work, or that it will do some harm. Neither of these burdens were ever discharged by Lithuania. They have categorically failed to show us that: (a) our policy does no good at all, and is therefore a waste of time and effort, or (b) our policy actually does substantial harm to banks, borrowers, or society. Instead they strategically erred by simply proving that we will not make the world a completely better place. Well, we’re sorry. Next time we’ll try both to win the arguments in favour of the motion, and say something to soothe extraneous fears from Team Lithuania. For now, we’ll simply take the win and e-march into the inaugural virtual semis!