Self help is no help for in­equal­ity

The Pak Banker - - OPINION - Helaine Olen

FOR all the howls of rage from plu­to­crats like Tom Perkins and Ken Lan­gone over pos­si­ble tax rate in­creases, there has been rel­a­tively lit­tle pub­lic anger about the in­creas­ing wealth dis­par­ity in the United States - es­pe­cially com­pared to the past. Dur­ing the Pro­gres­sive era in the early 20th century and the Great De­pres­sion, we saw vi­o­lent strikes and marches on Wash­ing­ton. These days, we have an army of some­times-in­tem­per­ate blog­gers and a la­bor move­ment so bereft the United Auto Work­ers union re­cently failed to mo­bi­lize work­ers in a Volk­swa­gen fac­tory in Chat­tanooga, Ten­nessee. Oc­cupy Wall Street, mean­while, is now a dis­tant mem­ory, even as more than half of all Amer­i­cans say they be­lieve the na­tion re­mains in an eco­nomic re­ces­sion.

So what changed? Kathleen Geier spec­u­lates in the Wash­ing­ton Monthly that the main­stream me­dia no longer re­flects the val­ues of the work­ing class. That's true, but it's more com­pli­cated than that. In fact, the me­dia re­flects our val­ues all too well.

We're a na­tion founded on the Protes­tant work ethic. Our fore­fa­thers came to Amer­ica with the idea that dili­gent ef­forts and thrift demon­strated both god­li­ness and virtue - and would re­sult in worldly suc­cess.

The self-help in­dus­try is the mod­ern sec­u­lar ver­sion of our ground­ing myth. It's a $10 bil­lion an­nual busi­ness that sells its ser­vices by claim­ing there is al­most no prob­lem - from weight loss to fi­nan­cial strug­gles - that can't be over­come with grit, de­ter­mi­na­tion and willpower.

So if you fail in your goal or fall be­hind: It's your own fault.

Self-help now has in­ter­na­tional ap­peal. But it still holds great­est sway in the United States where, as Thomas Frank re­cently noted in Sa­lon, pos­i­tive think­ing is "the great Amer­i­can tra­di­tion." Post 2008, Time mag­a­zine dubbed CNBC per­sonal fi­nance guru Suze Or­man the "Queen of the Cri­sis" and ra­dio show mon­ey­man Dave Ram­sey achieved new heights of pop­u­lar­ity by telling Amer­i­cans they are "stupid" when it comes to han­dling their money.

Take a look at Amer­i­can at­ti­tudes to­ward mort­gages and credit. Dur­ing the real es­tate bub­ble, people were lec­tured by ev­ery­one from bankers to elected of­fi­cials to self-ap­pointed pun­dits to buy homes with what­ever money they could rus­tle up.

"The sin­gle great­est bar­rier to first-time home own­er­ship," Pres­i­dent Ge­orge W. Bush ob­served in 2002, is a high down pay­ment." Govern­ment pro­grams soon kept pace with Wall Street in of­fer­ing no-money-down home loans. Easy credit was of­fered to al­most any­one who wanted to own their own abode. Books ap­peared on the best­seller lists with ti­tles like The Au­to­matic Mil­lion­aire Home­owner. Federal Re­serve Chair­man Alan Greenspan told home­buy­ers to give up on con­ven­tional 30-year fixed mort­gages and sign up for ex­otic ad­justable-rate loans in­stead.

When the real es­tate mar­ket went south and the econ­omy crashed, who did we be­lieve should take re­spon­si­bil­ity for the mess? Well, as Dean Stark­man noted in a re­cent New Repub­lic ar­ti­cle, twice as many people blamed the 2008 eco­nomic cri­sis on home-buy­ers who bor­rowed too much money, rather than Wall Street and the fi­nan­cial ser­vices sec­tor, ac­cord­ing to a 2010 poll. Then there's day-to-day bud­get­ing. We're rou­tinely ex­co­ri­ated for pur­chas­ing lat­tes, smart­phones and other sup­posed lux­ury items. These are, af­ter all, ac­tions within our con­trol.

Un­for­tu­nately, they are not the ac­tions driv­ing our fi­nan­cial woes. That would be the soar­ing costs of health­care, hous­ing and ed­u­ca­tion - things that go all but un­men­tioned by the self­help in­dus­try. So does the fact, as Paul Krug­man blogged re­cently, that real hourly wages for 60 per­cent of men have fallen, not risen, since 1973.

Silent in the fact of fall­ing salaries, the es­tab­lish­ment now trum­pets fi­nan­cial lit­er­acy as a way to stop our sup­posed out-of-con­trol spend­ing habit. It's an ap­peal­ing ar­gu­ment in a self-help cul­ture: If we teach people how to han­dle their money, then they'll get it right.

A 2012 re­port from the Or­ga­ni­za­tion for Eco­nomic Co-oper­a­tion and De­vel­op­ment (OECD) even claimed "The causes of the re­cent fi­nan­cial cri­sis were com­plex, but the lack of fi­nan­cial lit­er­acy was cer­tainly one of the ag­gra­vat­ing fac­tors leading to ill-in­formed de­ci­sions on mort­gage loans." Many of us be­lieve that now. Make that most of us. Ninety-nine per­cent agree fi­nan­cial smarts and skills should be taught in high school, ac­cord­ing to a re­cent sur­vey by Har­ris In­ter­ac­tive.

Yet there is no ev­i­dence that nei­ther chil­dren nor adults know less about fi­nan­cial mat­ters to­day than they did in 1930, or 1950, or the late 1970s - when the U.S. sav­ings rate was 10 per­cent. There is also no ev­i­dence they know more than in 2006, when the sav­ings rate fell to zero. (To­day is it about 4 per­cent.)

To pre­sume home-buy­ers put into preda­tory loans by mort­gage bro­kers work­ing for out­fits like Coun­try­wide Fi­nan­cial could have stopped the hous­ing mar­ket im­plo­sion if they knew a bit more about bal­anc­ing their check­book is ab­surd. Just as ab­surd as think­ing a high school class in money man­age­ment could help some­one two decades later de­ci­pher a 100-page, sin­gle-spaced mort­gage orig­i­na­tion doc­u­ment loaded with "gotcha" clauses.

But our self-help cul­ture doesn't al­low us to ad­mit we might not be able to over­come greater eco­nomic woes on our own. In fact, it of­ten makes our in­di­vid­ual sit­u­a­tions worse when things don't work out.

Thomas Sch­eff, a pro­fes­sor emer­i­tus at the Univer­sity of Cal­i­for­nia, Santa Bar­bara, re­cently pub­lished a paper in the jour­nal Cul­tural So­ci­ol­ogy claim­ing that in highly in­di­vid­u­al­is­tic cul­tures like the United States, where people are en­cour­aged to "go it alone," shame is the price we pay for not achiev­ing suc­cess.

Viewed through this prism, you can think of the con­stant sim­mer­ing anger in our cul­ture as the road rage of self-help cul­ture. Fear­ing the hu­mil­i­a­tion of fail­ure, we ag­gres­sively lash out at oth­ers who prove the self-help nos­trums a lie.

This could be the rea­son that many, in­clud­ing Repub­li­can mem­bers of Congress, blame the long-term job­less for their own plight, and cut off their un­em­ploy­ment checks. We say those who fell prey to preda­tory lend­ing weren't mis­led, but were greedy.

Ac­cord­ing to the tenets of self-help, the vic­tims of the Amer­i­can eco­nomic col­lapse need not a help­ing hand, but a kick in the pants. True, self­help ad­vice is not al­ways fully use­less. Sav­ing money, for starters, is cer­tainly more likely to lead to a pros­per­ous life than not putting any­thing aside at all. Yet all too of­ten, knowl­edge and in­di­vid­ual ac­tion are not enough. Self-help causes us to take the po­lit­i­cal and eco­nomic prob­lem of in­creas­ing in­come in­equal­ity and make it per­sonal. That's both morally wrong and fi­nan­cially in­ef­fec­tive. That we fall for it only makes it worse.

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