Has the Recession Been a Curse or a Blessing?

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The recession has been a major kick in the pants—but is that exactly what you needed? For folks who underwent big career shifts they were more or less forced to make, and who are happy about the changes, the answer is most definitely yes.

There’s no shortage of sad, everybody’s-scaling-back recession stories—“recession porn,” as it’s known. On the flip side, a USA Today story profiles a few recession success stories, for whom the economic downturn has been a blessing in disguise.

There are entrepreneurs who have started new businesses—one’s a neat niche, creating kids’ piñatas that actually break open after partygoers give them a few whacks. (How many times has a frustrated parent had to go up to one of those thick cardboard ones and ripped it open, because the kids couldn’t get at the candy otherwise?) Other people followed their passions, teaching piano lessons or working with animals. Still others have taken especially sharp career turns: from city bus driver to welder, from lumber mill staffer to nurse.

It’s nice to read these type of “keep hope alive” stories for a change. For every successful career transformation, however, there are probably many more stories like the ones featured in the WSJ over the weekend that declared “The ‘Democratization of Credit’ Is Over.”

Karen King, the woman featured in the story, admittedly lived beyond her means for years, often buying gifts and clothes, eating out at restaurants, and attending pro basketball games—none of which she could really afford. She’s now tens of thousands of dollars in debt, and, as the WSJ tells it, she’s emblematic of many low-income citizens who were wooed by credit card companies not long ago—and who are currently being hounded by debt collectors.

The WSJ describes the evolution:

The democratization of credit began decades ago. Federal legislation in the late 1970′s required banks to avoid discriminatory lending and meet the needs of local communities, spawning a wave of home buying and entrepreneurship in lower-income neighborhoods…

Credit-card borrowing took a similar path. One cause was a 1978 Supreme Court decision that let banks charge whatever interest rate was legal in the state where the card operation was headquartered. The ability to charger higher rates made it more profitable to offer cards to risky borrowers…

By 2007, 35% of Americans in the bottom two-fifths of income had a credit card with a balance, up from just 21% in 1989. And use of these cards increased. The median balance on the cards, adjusted for inflation, grew 180% over that period for people in the bottom fifth of income and 80% in the next highest fifth.

When the recession struck, banks that had eagerly wooed new credit-card customers reversed course. “Rather than keeping accounts that have high loss potential and limited revenue opportunity, the mission becomes to close out those customers’ accounts and drive them off the books,” said a report from TowerGroup, a research firm.

I’m not sure if we had true credit democracy to begin with, but it seems like whatever democratization occurred is fading. Perhaps getting a credit card won’t be quite as quick and easy as ordering a pizza. What situation will we be left with? Credit fascism? Aristocratic credit? A credit oligarchy?

And will whatever changes that the banks, credit card companies, and consumers undergo as a result of the recession effect actually last? Or will everyone just go back to their old ways once the storm clears?

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