Freedom Is Meaningless Under Insurmountable Debt

Advocates are arguing that the Thirteenth Amendment prohibits usurious loans.

A red arrow goes up through a spliced copy of the Constitution and a one hundred dollar bill.
Shutterstock / The Atlantic

I wonder: What would Timothy Howe, a Reconstruction-era congressman who opposed slavery, have made of the story of Raedell Piaso?

A few years ago, Piaso was making a little less than $23,000 a year as a receptionist in Albuquerque when she couldn’t make her rent for her apartment.

Facing eviction, she took out a loan. She signed over the title to her family’s 2004 Ford F-150 as collateral and agreed to an annual interest rate of 300 percent. She thought she could make it work by cutting back—from macaroni and cheese, say, to ramen noodles.

Her payment history shows her trying to keep up. Over 13 months, she gave more than a quarter of her take-home pay to the lender—$5,617—on a loan of $1,971. But the lender applied less than $2 of that to the loan principal; the rest vaporized in fees and interest.

She fell behind, and the lender threatened to seize her truck. She drove west and left it with her parents on the Navajo Reservation, where the lender couldn’t reach it. And after that, she took the bus to work.

Piaso is one of millions of low-income Americans who use high-cost loans to bridge the gap between stagnant wages and the cost of living, and who live months or years trying to pay off loans they cannot afford—and so remain in debt.

The condition of their lives raises the question: Are these Americans fundamentally free?

Howe and his colleagues in the Reconstruction Congress grappled with this question after the Civil War. Howe was a Whig cum Republican, educated in a Methodist seminary, and trained in the law. He sat as a justice on the Wisconsin Supreme Court before winning a U.S. Senate seat in 1860. He was one of the Senate leaders who voted for the Thirteenth Amendment before Abraham Lincoln had even committed to it. And he was there for the rich aftermath following the amendment’s enactment: when the Reconstruction Congress contended with what it meant to ban slavery, and did so by defining its opposite—freedom.

As the historian Eric Foner and others have described, the Reconstruction Congress adopted a core view of the new Republican Party: that central to freedom is the right to enjoy the fruits of one’s own labor. In his final debate against Stephen A. Douglas, Lincoln cast the idea of free labor as “the common right of humanity” versus “the divine right of kings … the same spirit that says, ‘You work and toil and earn bread, and I’ll eat it.’”

To many northern Republicans like Howe, that aspect of freedom was woven in with other fundamentals of liberty: the ability to come and go as one pleases, to own property, and to be educated.

So how to define the labor part of freedom—especially for people whose only property was their own body and what that body could produce through work?

One of Congress’s early efforts to answer that question was the Civil Rights Act of 1866. It declared that “all persons” born in the United States were entitled to be citizens, with all the rights of white citizens. The first right to be enumerated was that to make and enforce contracts, which is an essential part of being able to use or sell one’s labor freely.

Even so, the freedom of contract can be a hollow thing, if one side holds the bargaining power and the other side only its labor.

In 1867, Congress expressly recognized that it was possible to agree to work and still be enslaved. With its Anti-Peonage Act, Congress outlawed debt peonage—contracts that force someone to labor in order to pay off a debt, whether it is “voluntary” or not.

This and other laws reveal how the Reconstruction Congress saw the labor part of freedom as “not just the right to participate in the market, but the right to participate in a way that frees you from undue coercion,” says Rebecca Zietlow, a founder of the Thirteenth Amendment Project, a group of scholars exploring the history and “untapped potential” of the amendment.

“It’s not much of a stretch,” she says, to argue that this vision of freedom protects against usurious debt contracts, just as it protects against traditional debt peonage. And it’s not much of a stretch to imagine a Reconstruction senator like Howe thinking of Raedell Piaso’s usurious loan in terms of freedom. For what, truly, is at the heart of contracts like the one Piaso signed? It is close to what Howe homed in on back in 1866.

At the time, Howe was debating a law on the books that allowed the railroads and other employers to sign up European immigrants for labor contracts and pay their passage to America. Signed into law in 1864, amid the labor shortage created by the Civil War, the law legalized contracts that bound an immigrant to pledge up to a year’s wages in order to pay off the debt for transporting him.

Two years later, the House wanted to enlarge the law’s powers to enforce the contracts against the immigrants. Howe and some other Republicans wanted to kill the law instead. To them, the foreign-labor contracts were “a species of slavery,” as one congressman put it.

The debate in the Senate chamber that July brought alive deeply different visions for what labor—and debt—should mean in America. Reading that debate now is piercing, for it represents the same divide that exists today: between the vision that has won, that of the lenders, and the vision that has lost, that which would protect the Raedell Piasos of the country.

One spokesman for the winners’ vision was Senator Reverdy Johnson, a conservative Democrat from Maryland. Johnson was a complicated soul. He had represented the slaveholder who claimed to own Dred Scott, but had voted for the Thirteenth Amendment.

Johnson called the immigration law “a very wise act,” and said nothing was wrong with enforcing it against immigrants who didn’t pay their transportation debts. There was no slavery about it, Johnson said, “except the slavery that exists in the case of any man who gets in debt for any sum.”

When Howe began to speak, he said he believed that Johnson misunderstood the nature of the law—and what enforcing it meant.

Mr. Howe: I understand it to be the main effect of these contracts to create a mortgage on the man himself.

Mr. Johnson: Oh no. It only says the contract shall be a lawful one. It is no more a mortgage on the man than is any debt you or I owe a mortgage on …

Mr. Howe: It says it shall be enforced.

Mr. Johnson: Of course, enforced like any other contract. Enforced how? By suit.

Mr. Howe:I do understand it to be the purpose of the second section of the act of 1864 to authorize our courts to enforce it specifically against the immigrant. If that is not a mortgage of the man, so far, I should like to know what it is.

Mr.  Johnson: It gives to whoever may be entitled to the benefit of the contract the right to receive his wages; that is all—a pledge upon his wages, not upon the man.

Mr. Howe: And authorizes the courts to enforce that pledge.

Mr. Johnson: Certainly.

Mr. Howe: There is only one way of enforcing it, and that is specifically against the man.

Mr. Johnson: To make him labor?

Mr.  Howe: Yes; make him labor. It means that or it means nothing.

In this debate, Howe put his finger on an issue that resonates in today’s world of high-cost debt contracts for people like Piaso, who have little property or wealth to lean on. It is the relationship among debt, labor, and freedom.

As the Thirteenth Amendment scholar Lea VanderVelde writes: "What is the difference between owning a man and owning his services,” if his services—his labor—are all he has? How different is it, truly, to hold and force a woman to work until she pays off her debt, from garnishing the wages of a woman who cannot keep up with a loan at 300 percent interest?

To be sure, this modern form of debt peonage doesn’t restrain one’s body—one’s physical freedom to move from place to place. But in the eyes of Howe and his fellow Republicans, its power is over something fundamental to liberty: the right to one’s future income.

Two years after Howe and Johnson sparred, Congress repealed the immigration law. By now, the lawmakers knew well that outlawing slavery and debt peonage was one thing; abolishing them was another.

They saw this not only in the South, where states worked to created stand-ins for slavery—with black codes, convict leasing, vagrancy laws, and debt peonage—but elsewhere throughout the country. For instance, a year after passing the Anti-Peonage Act, Congress asked the military to “reclaim from peonage the women and children of the Navajo Indians, now held in slavery” on and around the reservation where Piaso grew up more than a century later.

The world Piaso faces is different from the one her ancestors faced. But hers still poses real questions about liberty. Piaso had one alternative to borrowing money at a usurious rate: become homeless.

Her story is rare, in that she found a good lawyer who challenged the lender and won back some of her money. But the millions of other borrowers who turn to loans in America’s ruthless credit landscape—are they really free?

“It’s like sharecropping—ostensibly it was a choice,” Mehrsa Baradaran, who’s written about this topic, told me. “You could say each individual sharecropper was not coerced into making that arrangement. But when you pan out, you look at the whole system of the South post-Reconstruction, it is coercion. It’s absolutely slavery again.”