These are my recollections of a life behind the iron curtain. I do not aim to give a perfect and objective evaluation of anything but to share my personal experiences and memories. It will explain why I just cannot get misty-eyed over some ideas on the political left and why I loathe many ideas on the right.
Lending money was a very tightly controlled activity behind the Iron Curtain. The regime had a de-facto monopoly on big lending and strictly regulated the activity. It was only possible to get a loan from a bank, and many young people did so when they started a family, just as they do today – to buy or build a house, an apartment, furnishings, etc.
My sister got a loan too when she got married. So did my parents.
I never heard of anybody having trouble with payments. The law regulated what rates can be given, what securities can be required and what payments can be requested, so for people getting into financial trouble this way was not common. Loan sharks existed – on those another time – because organized crime existed. But it was that – a crime. If it was possible for anyone getting into insolvency or personal bankruptcy because they could not keep up with their legal payments, It was rare and I never heard of it.
That has changed rapidly after the Iron Curtain fell. The bad thing about that was that our first finance minister and late president Václav Klaus is Randian libertarian, and he governed the state finances with the assumption that “the invisible hand of the free market” is a panacea for all problems. One of the legacies of that time was the abandonment of many regulatory laws, including those that defined and outlawed loan-sharking. Suddenly it became legal to loan money at thousands of percent interests, with short payments, exorbitant fees, etc. etc. A few thousands worth of debt could, and still can, balloon into thousandfold and suddenly you pay more in monthly fees than the original debt was worth. Speculations with debts became rife and a whole money-sharking industry emerged from the free market quite naturally.
Only it is not a solution, but a cancerous growth. Today roughly 8% of our little country’s population got caught in these financial traps. Some people even very obviously through no fault of their own – they were indebted by their careless or clueless parents or inherited a debt without knowing it.
And thus the free market provided a new class of people – the working poor, the debt-slaves and the homeless. I think this too was one of those few things the regime did actually handle properly, or at least better than the current one which still did not catch up with this entirely unnecessary crisis and still did not put the money lenders on a short leash.