Predatory Lending

Effects on Social Welfare
In most western democracies, the desire to eliminate or reduce economic inequality is
generally associated with the political left. One practical argument in favor of reduction
is the idea that economic inequality reduces social cohesion and increases social
unrest, thereby weakening the society. There is evidence that this is true (see inequity
aversion) and it is intuitive, at least for small face-to-face groups of people. Alberto
Alesina, Rafael Di Tella, and Robert MacCulloch find that inequality negatively affects
happiness in Europe but not in the United States.
It has also been argued that economic inequality invariably translates to political
inequality, which further aggravates the problem. Even in cases where an increase in
economic inequality makes nobody economically poorer, an increased inequality of
resources is disadvantageous, as increased economic inequality can lead to a power
shift due to an increased inequality in the ability to participate in democratic processes.
Capabilities Approach
The capabilities approach – sometimes called the human development approach –
looks at income inequality and poverty as form of "capability deprivation". Unlike
neoliberalism, which "defines well-being as utility maximization", economic growth and
income are considered a means to an end rather than the end itself. Its goal is to
"wid[en] people's choices and the level of their achieved well-being" through increasing
functionings (the things a person values doing), capabilities (the freedom to enjoy
functionings) and agency (the ability to pursue valued goals).
When a person's capabilities are lowered, they are in some way deprived of earning as
much income as they would otherwise. An old, ill man cannot earn as much as a
healthy young man; gender roles and customs may prevent a woman from receiving an
education or working outside the home. There may be an epidemic that causes
widespread panic, or there could be rampant violence in the area that prevents people
from going to work for fear of their lives. As a result, income and economic inequality
increases, and it becomes more difficult to reduce the gap without additional aid. To
prevent such inequality, this approach believes it's important to have political freedom,
economic facilities, social opportunities, transparency guarantees, and protective
security to ensure that people aren't denied their functionings, capabilities, and agency
and can thus work towards a better relevant income.
Policy Responses Intended to Mitigate
No business which depends for existence on paying less than living wages to its
workers has any right to continue in this country.
—President Franklin Delano Roosevelt, 1933
A 2011 OECD study makes a number of suggestions to its member countries, including:
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