My impression is that usury actually inhibits economic development because you’re stuck paying the interest instead of investing in your future. Lower interest rates encourages more risk taking economic activities. Sometimes those risks don’t pan out, but, if you believe that overall your economy will prosper, lower interest rates ensure that proceeds from risks stay more with those generating the activity rather than the lenders themselves. Liquidity is important but not as much value creating (if everyone loans the other person $5, there’s a lot of “economic activity”, but nothing of value has been created in that fake scenario). That’s simplistic of course and liquidity itself can be value-generating if there’s intention behind it (ie vetting that the liquidity generated is going to an enterprise that will likely yield net returns overall for some reason).

That’s also why there’s bankruptcy protection. Sucks for the lenders that their gamble didn’t pay off but generally they’re able to take a loss and their other investments can balance them out. Plus bankruptcy protections apply to them to if they overextended themselves or didn’t manage the investments.

The point is that anyone can suffer an economic hardship but that doesn’t mean society should strive to create punishing conditions if you are unlucky (or, in most payday scenarios, just start off poor). Of course some people will abuse the system. There are abuses happening by lenders too. Economic policies around this though can only work at the macro scale, so you find other ways to mitigate the problems through legal structures.

I think there’s this unhealthy association between lendees not paying and it somehow being a moral failing on their part. No. It’s the fault of the lender for not vetting their investment properly. Sure they should be allowed some attempt at recollection but there need to be strong usury protections too (if you want to allow high interest rates in your economic region, then high usury rates should be pared with much easier ability to limit recovery after some limit is collected. If you think about it, in payday scenarios, the successful “investments” on the part of the lenders (ie the people actually making good on the payments) are subsidizing the lenders loans to those that can’t pay. It’s a vicious cycle frequently for those involved because the loans aren’t actually generating economic value and are really being used just to help people get by. High interest loans really need to be restricted to risky economic investments (starting a business of some kind) or those with the resources that they could pay it back and just have a short liquidity issue. This $500 @ 30% interest to fix your car that’s your only mode of transportation to/from work or $1000 to go to the doctor seems seems like not a useful application. It’s a non-economic need that person has and there’s not really any likely realistic scenario where those loans would have a net positive impact on the economy. Forcing the area to invest in useful public transportation solutions and safety net for medical care would return far more value to the economic prosperity and social stability/welfare of the area.