Credit cards are obsolete. Is consumer debt heading the same way?

The technological history of credit.

Slate's Matt Yglesias, in a post about the effect higher bank capital requirements could have on the real economy, gives a brief overview of the changing nature of credit in America:

Once upon a time credit overwhelmingly meant business credit, which then expanded into the personal sphere primarily in the special case of houses and what you might call household investment goods (cars, large appliances). That then metastasised into the all-in culture of consumer debt and credit that we know from the past 25 years.

Yglesias' point is that high capital ratios will reverse that trend, boosting the price of consumer debt while making corporate debt cheaper. This, he adds, might not be a bad thing, "disproportionately encouraging business borrowing to finance investment while discouraging consumer borrowing to enhance consumption".

But what I find interesting is how that "metastasisation" of a relatively small field of debt into the widespread credit economy we now have was born. It was, broadly, a technological imperative, as the Financial Times' Isabella Kaminska points out:

The credit component in credit cards came into play because in the “old days” extending credit was the easiest way to transact remotely without the use of physical cash.

Any alternative back then would have involved waiting hours (if not days) for the merchant to call your bank, who would then verify who you were, who would then make a deduction from your account, who would then send an instruction to the merchant’s bank, whose bank would make a corresponding credit, who would both use different parties to clear and confirm the transaction. Sometimes by post.

It was basically much easier (from a velocity point of view) for a bank to guarantee to the merchant that you were good for the money by means of a piece of plastic. The transaction would take place and you would then owe the bank, whilst all the settlement processes continued on in the background. If you didn’t pay, it was between you and the underwriter bank. The merchant was covered. You were probably black-listed.

Initially, then, the fact that credit cards enabled people to freely and easily spend beyond their means wasn't deliberate — it was a by-product of the real aim, which was just to let people pay for things. It wasn't quite a bug in the system, because card issuers were always more than happy to let people pay off their credit card bills in instalments, racking up healthy interest payments in the process. But it was hugely important in getting the concept of borrowing to pay normal daily bills into people's heads.

Nowadays, of course, that technological imperative is nonexistent. Although they will take every possible opportunity to delay payments, squeezing marginal gains from the extra interest, banks are capable of transferring money instantly. At the very least, the fact that debit cards are now possible renders the initial rationale for credit cards obsolete.

Of course, if this apotheosis of the credit economy is something which is worth pushing back against, as Yglesias suggests, then doing so by just raising interest rates is about the most damaging possible way. People have got used to boosting their standard of living with easy credit, and until they can achieve the same standard without resorting to credit, making it more expensive to borrow could backfire heavily.

Credit cards. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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"We repealed, then forgot": the long shadow of Section 28 homophobia

Why are deeply conservative views about the "promotion" of homosexuality still being reiterated to Scottish school pupils? 

Grim stories of LGBTI children being bullied in school are all too common. But one which emerged over the weekend garnered particular attention - because of the echoes of the infamous Section 28, nearly two decades after it was scrapped.

A 16-year-old pupil of a West Lothian school, who does not wish to be named, told Pink News that staff asked him to remove his small rainbow pride badge because, though they had "no problem" with his sexuality, it was not appropriate to "promote it" in school. It's a blast from the past - the rules against "promoting" homosexuality were repealed in 2000 in Scotland, but the long legacy of Section 28 seems hard to shake off. 

The local authority responsible said in a statement that non-school related badges are not permitted on uniforms, and says it is "committed to equal rights for LGBT people". 

The small badge depicted a rainbow-striped heart, which the pupil said he had brought back from the Edinburgh Pride march the previous weekend. He reportedly "no longer feels comfortable going to school", and said homophobia from staff members felt "much more scar[y] than when I encountered the same from other pupils". 

At a time when four Scottish party leaders are gay, and the new Westminster parliament included a record number of LGBTQ MPs, the political world is making progress in promoting equality. But education, it seems, has not kept up. According to research from LGBT rights campaigners Stonewall, 40 per cent of LGBT pupils across the UK reported being taught nothing about LGBT issues at school. Among trans students, 44 per cent said school staff didn’t know what "trans" even means.

The need for teacher training and curriculum reform is at the top of campaigners' agendas. "We're disappointed but not surprised by this example," says Jordan Daly, the co-founder of Time for Inclusive Education [TIE]. His grassroots campaign focuses on making politicians and wider society aware of the reality LGBTI school students in Scotland face. "We're in schools on a monthly basis, so we know this is by no means an isolated incident." 

Studies have repeatedly shown a startling level of self-harm and mental illness reported by LGBTI school students. Trans students are particularly at risk. In 2015, Daly and colleagues began a tour of schools. Shocking stories included one in which a teacher singled out a trans pupils for ridicule in front of the class. More commonly, though, staff told them the same story: we just don't know what we're allowed to say about gay relationships. 

This is the point, according to Daly - retraining, or rather the lack of it. For some of those teachers trained during the 1980s and 1990s, when Section 28 prevented local authorities from "promoting homosexuality", confusion still reigns about what they can and cannot teach - or even mention in front of their pupils. 

The infamous clause was specific in its homophobia: the "acceptability of homosexuality as a pretended family relationship" could not be mentioned in schools. But it's been 17 years since the clause was repealed in Scotland - indeed, it was one of the very first acts of the new Scottish Parliament (the rest of the UK followed suit three years later). Why are we still hearing this archaic language? 

"We repealed, we clapped and cheered, and then we just forgot," Daly says. After the bitter campaign in Scotland, in which an alliance of churches led by millionaire businessman Brian Souter poured money into "Keeping the Clause", the government was pleased with its victory, which seemed to establish Holyrood as a progressive political space early on in the life of the parliament. But without updating the curriculum or retraining teaching staff, Daly argues, it left a "massive vacuum" of uncertainty. 

The Stonewall research suggests a similar confusion is likely across the UK. Daly doesn't believe the situation in Scotland is notably worse than in England, and disputes the oft-cited allegation that the issue is somehow worse in Scotland's denominational schools. Homophobia may be "wrapped up in the language of religious belief" in certain schools, he says, but it's "just as much of a problem elsewhere. The TIE campaign doesn't have different strategies for different schools." 

After initial disappointments - their thousands-strong petition to change the curriculum was thrown out by parliament in 2016 - the campaign has won the support of leaders such as Nicola Sturgeon and Kezia Dugdale, and recently, the backing of a majority of MSPs. The Scottish government has set up a working group, and promised a national strategy. 

But for Daly, who himself struggled at a young age with his sexuality and society's failure to accept it, the matter remains an urgent one.  At just 21, he can reel off countless painful stories of young LGBTI students - some of which end in tragedy. One of the saddest elements of the story from St Kentigern's is that the pupil claimed his school was the safest place he had to express his identity, because he was not out at home. Perhaps for a gay pupil in ten years time, that will be a guarantee. 

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