The Poverty Business

The May 21 issue of Business Week has an interesting cover story that touches on a number of issues discussed here and locally in blogs. Titled "The Poverty Business," the story looks inside US comapnies that are making big profits from the nation's working poor. Here's some key quotes for the story:

What's the purpose of capitalism?

"The only feasible way to run a capitalist scoiety is to allow companies to maximize their proftis. That will sometimes include allowing them to sell things to people that will sometimes make them worse off."

Tyler Cowen
Economist at George Mason University

What did PT Barnum say?

"I don't know whether I was more bothered by the ignorance of the customers or by the company taking advantage of the ignorance of the customers."

Kehinde Powell
Former tax preparer for Jackson Hewitt

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A couple weeks ago, I stopped by two local payday loan stores -- the Cash Store and Check Advance -- to see how it works. Here's what I found out:

There was no credit check on me. The paperwork is quick and easy to fill out. I needed a blank check from an account that had been open for 30 days -- I didn't need to prove there was money in the account. I was told I could borrow $500 that day. I needed to write out a check for $610. The $110 is the finance fee for 14 days. If I did nothing at the end of the 14 days, they would cash my check. The annual percentage rate (APR) on the loan would be 573.57 percent. While I waited around reading brouchures and waiting to talk to the girl at the counter, five people came in and all rolled over their $500. They paid the $110 in cash and wrote another check for $610 date 14 days later. The store two blocks away only charged $100 for 14 days.

Read The Poverty Business Brain Grow and Keith Epstein.

Read about The Economics of the Poverty Business.