Self Help is no help for inequality

By Helaine Olen
March 25, 2014

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 home-buyers 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 self-help 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, self-help 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.

 

PHOTO (TOP): A job seeker reads job postings at the Virginia Employment Commission office in Alexandria, Virginia, November 6, 2009. REUTERS/Molly Riley

ILLUSTRATION (INSERT 1): Reuters/Library of Congress

PHOTO (INSERT 2): Aniba Casavilca fills out a registration form as he begins his search for a job at the Verdugo Jobs Center, a partnership with the California Employment Development Department, in Glendale, California, November 7, 2008. REUTERS/Fred Prouser

PHOTO (INSERT 3): Demonstration during the Chrysler strike in Detroit, Michigan, in 1937. Credit: Walter P. Reuther Library


14 comments

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Ms Olen: Thank you for writing this. It so needed to be stated, and you state it superbly.

I get so tired of hearing the stupid refrain that all these ignorant, greedy people bought more house than they can afford. Americans have dangerously short memories. We were having it pounded into our heads by professionals in the finance industry that you’re stupid if you DON’T buy a house and there was no lack of encouragement to buy big, and watch your nest egg grow. The people in the finance industries are smarter than we are about making money and they pump our heads full of misinformation that is intended to make THEM money. And then when we come out on the short end, it’s shame on us.

I’m afraid we’ve allowed this once great nation to be turned into nothing more than a giant market place. If something does not have monetary value then it has no value. The biggest scoundrels who make a lot of money are admired and celebrated while someone who may have chosen to focus more on raising a family or perhaps some artistic pursuit is looked down on if they don’t make serious money. We’re destroying all that’s good about this country. It’s a crying shame.

Posted by carnivalchaos | Report as abusive

“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…Government programs soon kept pace with Wall Street in offering no-money-down home loans. Easy credit was offered to almost anyone…when the real estate market went south and the economy crashed…”.

Yes, and today we see endless ads hawking weight loss promises that are highly unlikely to a public increasingly obese. Only the gullible waste their money this way, but there are many, many gullible.

One reason there is an increasing number of stupid people in our society is that warning labels have thwarted the essential process of natural selection. Before warning labels those unnecessary to or undesirable in an ever-improving human gene pool were eliminating themselves at an increasing and statistically significant rate.

“[according to a poll]…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…”. Why didn’t you include the “government programs” you mentioned earlier in your “rather than…”?

“Wall Street” is not a precise term. It can refer specifically to the “Big Board” and all American Stock Exchanges. Many, many Americans of all financial circumstances buy, sell and/or own shares in American businesses listed there. Economic fluidity is not only desirable but essential to a healthy American economy. It is NOT, as you infer, part of “the problem”; but part of “the solution”.

“Wall Street” also refers specifically to the eight block long financial district of New York City where the “Banksters” rome, rule and ruin. Many inexplicably incompetent and ineffective government bureaucrats and agencies should be held accountable for their failure to protect Americans from the “insider” financial deceptions and abuses that collapsed like a house of cards with the “real estate bubble”.

It is nothing less than frightening that apparently ALL bank management, shysters and corrupt employees directly and personally responsible as well as innocent shareholders actually and unjustly profited from acts of appalling bad faith. Those responsible should have been identified, fired and, in some cases, jailed; but available evidence strongly suggests these “banksters” are “untouchables”.

You can’t fire a union government bureaucrat, which is largely why there exists insufficient incentive to draw enough bright people into the medical field and general practice BEFORE trying to “cover everybody”. The fact that financial smarts and skills are not taught in high school is only PART of the disgrace of our “public education”.

Our goals and methods should originate in think tanks of our best and brightest. These should apply nationwide and uniformly to assure that student funds, incentives and courses produce citizens qualified to cast an intelligent vote. Employers need literate, trained employees, both today and in the future.

We have college graduates that haven’t a clue how to balance a checkbook or budget their pay check. A third of our young people do not meet military standards of enlistment. Whose fault is that?

We shoot bullets today at targets not yet even envisioned, and yet many of the skills that will predictably be necessary in any plausible future scenario languish without public recognition or interest. If our future is to be better than Rome and it’s games, what are we doing today to make it better tomorrow?

America’s economic future depends on our thinkers and economic production, NOT on our sports stars, Rap stars, or movie stars. You talk of a “savings rate” of 4% at a time when the rate of return on savings is a quarter of that! No one can plan their financial future with such sea change at the whim of each party in power in Washington.

Self-help is but one part of the overall mechanism of capitalism, an economic system which requires both carrot and stick. Just as there are certain attributes that contribute to success, there are also certain attributes that contribute to failure.

Unfortunately, today it is “culturally insensitive” or even “racist” to insert such discussion in public; and impossible to teach or implement what we know as public policy. There has always been “income inequality”, just as there has always been “talent inequality” or “skill inequality”. It’s all a matter of “supply and demand”.

What is morally wrong and financially ineffective is to deny these fundamental truths. You say that “…shame is the price we pay for not achieving success…”. I respectfully disagree.

There is no black and white separation between “success” and failure. There are many “shades of gray” between the very rich and abject poverty.

Is it “progress” that so many heads of households that claim to be “poor” (SNAP, EIC, free school lunches, etc.) drive, their countless kids have smart phones, the “right” tennis shoes, etc. If they show any emotion, it is not shame, not gratitude, but anger.

It is THEM and their children that disrupt the learning process in our schools, terrorize our neighborhoods with crime and gangs, first to mouth off to any and all authority, and then complain too many wind up unemployed or in prison. Their position in life is everyone’s fault but their own. They are like oysters, living off all that comes their way as a “right”.

The “real truth” is that anyone and everyone born in America has already “won the lottery” as compared to the rest of the world in terms of present and future quality of life. It is THEY that must “show the world” what they’ve got, NOT the other way around.

Posted by OneOfTheSheep | Report as abusive

This article could really be distilled into talking about the individual and the collective. My view: Not all individuals have equal skill and ability. An individual lacking skill and ability who with full willpower engages in self help processes in far, far less likely than an individual with great natural skill and ability to be financially successful. It is the order of the day that neither the efforts of great individuals be stifled (as communism does) nor that individuals be left behind permanently to suffer from their ‘own lack of ability’ (as capitalism does). Right now, the world is living out the remainder of Reagan/Thatcherism which cares little for those left behind. As with anything, if left ignored, there is a backlash effect. I disagree with the article that the woes of inequality have been forgotten – I think that the public presence of a phenomenon can be poor indication of the public’s feelings on something.

Posted by BidnisMan | Report as abusive

Very good article, but no solutions….
@OOTS, well said as usual.
@Bidnisman, I think the Reagan area started things, but Globalization took over. Our economy will continue to suffer until the world is truly flat. When our average income and standards of living equal those of the emerging nations, things will begin to “grow again”. ore slowly though as there will be 4 billion people actively in the economy.
Also, Love you screen name. Is it a take off of “Barry the BidnisMan”? I think it was a SNL skit?

Posted by tmc | Report as abusive

So some people told other people to do something, and they did it. So what? That’s been going on ever since there’s been people. If some yahoo is on TV trying to sell people on how great something is, or charging fees to come listen to them give speeches about how great something is… commonsense would dictate… If what they’re talking about is so great, then why aren’t they just out there doing it themselves? Why are they wasting time telling everybody else how to do it?

Anybody I’ve ever known who falls for that kind of stuff, is always the same kind of person… Dumb. They’re too stupid and lazy to actually figure something out on their own, or put in the real time it takes. They want to go to some afternoon seminar, or read a book… and have it tell them in a few hours, how to make a bunch of money. Then they’re shocked when it doesn’t work, and they want to blame somebody.

So what can we do? Fine dumb people? I couldn’t have cared if 500 people lined up to tell me to buy a house that was priced four times more than it was a couple years earlier… I didn’t do it. Because I’m not dumb. That’s the problem with the US today… Everything is dumbed down to the lowest IQ. Some idiot can’t talk and drive at the same time, so the other 99% of people aren’t allowed to use their phone anymore. People do dumb things, so we have to keep passing laws to stop them from doing dumb things. Then all the smart people are penalized.

Posted by dd606 | Report as abusive

I never bought or read the book, “The Secret”, but I always suspected the big “secret” was how the author of the book got rich. My grandmother told me decades ago that the way to ensure financial stability was to “Save some of your paycheck, even if it’s only $5.00 a week”. That works.

Posted by JL4 | Report as abusive

OneOfTheSheep: “One reason there is an increasing number of stupid people in our society is that warning labels have thwarted the essential process of natural selection.”

Wow. So, information makes us stupid. That’s a new one on me. You must be a conservative. They don’t seem to like information much. Labels are simply information. What a person does with that information is up to them, but at least it enables them to make an informed decision. Some people have adverse health reactions to certain foods, additives, ingredients, etc. Some people use the labels because they are on a particular kind of diet and labels help them make intelligent decisions. Some people just like to know what they’re putting into their bodies. Too often conservatives have this knee-jerk impulse to attack anyone who doesn’t live their life the way the conservative does. So you don’t read labels. That’s fine, but to suggest that labels are contributing to the dumbing down of America only serves to prove that it’s not label reading that’s making us dumb.

dd606: “Anybody I’ve ever known who falls for that kind of stuff, is always the same kind of person… Dumb.”

Here’s the problem I have with what you’re saying. We’re talking about finance industry professionals. Their job is not to help you make a wise investment in a home, designing a portfolio, investing in gold, or whatever. Their job is to make themselves money and they’re always finding ways to accomplish that and to increase what they make. They spend their careers studying this stuff. Sure, people need to do their homework when they go to take out a mortgage or invest their money in anything. But the average person has a limited amount of time to do their research. These professionals will always be one step ahead of the average person. I’m not saying that they’re all crooks looking to screw over everyone who walks in their door. Part of that making money business is to stay in business, so you have to do some things right. But to suggest that anyone who listens to these people and follows through on their advice is stupid, is just plain arrogant. They might not be particularly smart at the complexities involved in buying a home. That’s what realtors are for. But they, too, are in it for the money, so they might not always give you the best advice either.

People need homes, and some people are better at matters of finance than others. I know a painter (the artist kind) who is simply brilliant at what he does, but not so brilliant when it comes to money. Is everyone who doesn’t know how to paint or how to interpret a painting stupid?

A person of average intelligence walks into a bank or a Countrywide office wanting to get a mortgage for a new home. If the lender talks him into taking out an adjustable rate mortgage, citing all sorts of statistics as to why it’s the best way to go (as Ms Olen mentions, no less than Alan Greenspan was hawking adjustable rate mortgages) then a certain percentage of the population will do it. So then the bottom drops out of the economy and they can’t afford their mortgage. And when too many people lose their homes because they can’t pay their mortgages, it has a ripple effect that can cause a lot more harm to more people, even those who don’t have a mortgage.

So here’s where I bring points made by OneOfTheSheep and dd606 together. Information is power (and it doesn’t make us stupid). Conservatives don’t like regulations, but wise people understand that regulations are necessary for a society to work. For one thing, it helps to keep the unscrupulous in check. There needs to be enough regulations in place so that the average American can apply for a mortgage and CLEARLY understand the risks. True, you can’t protect everyone from themselves, but when there’s a significant number of people being hurt by an industry practice, then the government needs to step in and come up with a way that will minimize that harm being done. It’s just practical common sense. This will make conservatives cringe, but we need government to help protect us from unscrupulous professionals, of all sorts. Lenders, builders, pharmaceutical companies, politicians (ESPECIALLY them), religious leaders, lawyers, daycare workers, food manufactures, etc. When a significant number of people are being hurt by some practice, the government needs to do something about it. That’s what they’re there for.

Posted by carnivalchaos | Report as abusive

@carnivalchaos,

It was YOU that jumps to the (wrong) conclusion…that information “makes us stupid”. Please. My point was that reasonably intelligent people don’t NEED to be told to keep their feet out from under the lawn mower, or that the Walmart Superman costume “…does not enable twearer to fly”.

Those that benefit from such labels are not necessarily desirable as continuing contributors to the human gene pool. When you eliminate natural selection, i.e. survival of the fittest, evolution is reversed. Man is then on a genetic path back to pond scum.

People of average intelligence need the help of trained realtors, bankers, electricians, etc. I fully agree that certification standards, regulations, etc. are as necessary as laws. But to be effective, those administering those trained in specialties should have to have reasonable competence and goals. Instead we have “peer review” of judges, lawyers, and even local, state and federal agencies that are largely ineffective in righting wrongs.

“We, the people” should demand that ALL people in government, business or as private parties have an absolute duty to “deal with one another” in good faith. I guarantee both Liberals AND Conservatives would choke on such common sense standard. As a Libertarian, I ask WHY must we each watch our own back?

It is solely the LACK of such standard that makes it so difficult for the average American to understand and meaningfully compare various mortgage (or rental) options. It should be the clear responsibility of those trained in a given discipline to employ their “advantage” to best advance the interests of those who hire them.

I have heard in court that no one knows what a law means until it is interpreted by a judge. If that be so, how can it also be true that “ignorance of the law is no excuse”? You can’t have it both ways, people! And yet, “we, the people” ARE dumb enough that today such double standard disrespects and demeans our very society.

WHY should rulings under the same guiding words mean one outcome under one judge and the exact opposite under another? Simple, really. America is graduating more and more lawyers such that this profession today increasingly infests every level of politics and commerce. The more unpredictable the law can be made, the more of them earn a comfortable living off the rest of us. Yes, it’s “us against them”, very much so.

In my own way, I agree with much of what you say and complain of here. I just don’t see any possible solution in the pervasive inefficiency and incompetence that typifies every level of government. I just don’t see any meaningful difference between what either of the two major political parties do when in power. Under each the size and influence of government always grows.

That’s because there is no consensus as to what is the proper role of government. No party will ever seek or allow consensus to emerge among “we, the people”.

Consensus would mean a finite limit to government. That would limit the amount politicians and bureaucrats could demand from our economy to perpetuate themselves.

I, like you, clearly see both what “is” and what “should be”. What I don’t see is any possible path from here to there.

Posted by OneOfTheSheep | Report as abusive

I don’t know how long you’ve been commenting on Reuters @carnivalchaos, but baiting the Sheepster isn’t normally a good idea. ;-)

Posted by tmc | Report as abusive

I am suspicious of claims, made by anyone, that purport to shed light on who should or should not contribute to the human gene pool. For one thing, I don’t accept on faith that Darwin intended his theory to apply I’m the manner suggested by social Darwinism. For another, while some behaviors clearly contribute to the weakening of the gene pool (incest for example) taking SD and eugenics to its illogical extreme would result in a continuos shifting of the goal posts defining what is fit to a degree to which I think the vast majority would be wise to object. Nearly 200 years after the dawn of the Industrial Age, we are still debating the very same questions posed by Galton, et al. I would like to think that most of so-called civil society answered those questions, especially in light of the instructive horrors of WWII era Europe. In addition, I have yet to see a proponent of even watered-down eugenics purport that he or she falls into the category of “one who should not reproduce.”

Posted by Heyoka | Report as abusive

@tmc, seriously?

Posted by JL4 | Report as abusive

Thanks so much for this article. I am so tired of structural mismanagement being put on the individual. That is turning inequality into abuse.

Posted by soccy | Report as abusive

OOTS: What do warning labels have to do with anything regarding this op-ed?

““We, the people” should demand that ALL people in government, business or as private parties have an absolute duty to “deal with one another” in good faith.”

I fully agree. The question is, how do you make that happen? That’s why we need regulations. Those who don’t practice in good faith must be made to pay a price. Instead, too often they’re rewarded.

Take our healthcare system, for example. I’m not necessarily suggesting that it’s run by a bunch of crooks, but I will say that much of the problem the US is running into is due to the fact that healthcare is a necessity for all people and unless we have government regulate our healthcare system to protect “the people’s” best interests, the healthcare system will fail because it will be designed and run with profit being the #1 goal, and with profit being the #1 goal healthcare outcomes and costs will not evolve in a way that maximizes the American people’s best interests. Healthcare cannot be effectively run on a purely market-based design. It’s never effectively been done before for any length of time. It worked for a while here in the US, but average Americans were being paid more (thanks, in part, to the power and influence of labor unions) and not everyone in the healthcare industry was out to make it rich. In other words, our healthcare was affordable.

But problems started early. Our elderly were increasingly unable to afford their healthcare needs. Healthcare was increasingly out of reach for the poor. Our soldiers couldn’t afford it. So government stepped in, as they should. But then it got to where the average American couldn’t afford it. We’d been needing government to step in again, but the Republicans and the insurance/healthcare industries wouldn’t allow it. Finally, Obama broke the log jam and got the ACA passed. The Republicans and the insurance/healthcare industries were not pleased and have been doing everything in their power to make Obama and the Democrats pay a political price while trying to repeal the legislation. This is what happens when special interests are allowed to take over our government. THIS is what must change.

Posted by carnivalchaos | Report as abusive

@carnivalchaos,

My point was that the number of people that have no clue as to where their own best interests lie appears to be increasing dramatically. Warning labels was my personal speculation as to one possible reason why.

It should go without saying that when someone doesn’t know where their personal best interests lie, it’s pretty much a “given” that they can do little to improve their personal prospects or economic well being. They are, in the end, even incapable of “voting their wallet”. So it has always been, and so it will always be.

If the “for profit” market still operates on the historical principle of “let the buyer beware”, more and more it becomes necessary for competent system overhaul. Our administering agencies have proved frighteningly inept again and again, apparently lacking anyone with authority to access and amplify those occasional embers of hope and fan them into substance.

The VA delays vital tests until a clearly intentional pattern of neglect reveals lives needlessly cut short or even lost. In my case the co-pay for drugs I am prescribed would cost me more in co-pays for a month’s supply than a three-month supply bought at retail from Costco Mail Order in Everett, WA.

In all fairness, it is Congress that establishes what I must pay in co-pay; and the VA does use competitive bidding to determine it’s suppliers. Unfortunately what it saves doesn’t ease the lot of veterans, but flows instead to fund the the VA bureaucracy. And yes, I think Medicare should use it’s considerable buying power to lower the cost of drugs to beneficiaries…to the point of buying overseas, if necessary.

At a time when the average American can’t get in to see their internist within a week when they come down with something Obama’s decree takes an ax to inexpensive individual policies many people had, doubles or triples their costs of insurance, and grants unfettered access to the previously uninsured into every doctor’s office. Thus our productive are displaced “in line” by the unproductive, and it will be over a decade before physician access will return to what it was IF IT EVER DOES.

And I shall also point out that the power and influence of labor unions have NEVER befitted “average Americans”, but only union workers. It is “the rest of us” that must pay an inflated price for infrastructure everywhere because of Davis-Bacon.

Perhaps the fun-house mirrors of your alternate reality looks normal when viewed through YOUR prescription lenses.

Posted by OneOfTheSheep | Report as abusive