The Culture of Debt
David Brooks wrote a good column about the “culture of debt,” he considers prevalent in the US today. He starts off by looking at the current debt crisis in his country - people have borrowed thousands of Dollars but aren’t able to pay them back, hence the economy suffers - and then especially at one specific place.
The specific example he gives is that of Diane McLeod who borrowed increasingly more money, especially by using expensive credit cards. In the end, she could not pay her loan back, so she was in great financial trouble. A debate quickly erupted between progressives and conservatives; the former blamed the companies that continue to loan money to her, while the latter blamed the woman herself arguing that, in the end, she was responsible for her own financial problems (also because no one forced her to borrow increasingly more money).
But then there is a third option, a third way ignored in the mass media, but one I agree with completely:
And yet if you look at McLeod’s case, and the entire financial crisis that it stands for, there is a third position. This is the position held in overlapping ways by liberal communitarians and conservative Burkeans.
This third position begins with the notion that people are driven by the desire to earn the respect of their fellows. Individuals don’t build their lives from scratch. They absorb the patterns and norms of the world around them.
Decision-making — whether it’s taking out a loan or deciding whom to marry — isn’t a coldly rational, self-conscious act. Instead, decision-making is a long chain of processes, most of which happen beneath the level of awareness. We absorb a way of perceiving the world from parents and neighbors. We mimic the behavior around us. Only at the end of the process is there self-conscious oversight.
According to this view, what happened to McLeod, and the nation’s financial system, is part of a larger social story. America once had a culture of thrift. But over the past decades, that unspoken code has been silently eroded.
And I think that’s the real issue here; the US culture has changed, and this culture is also slowly changing in Western Europe. It’s something that should worry most of us; people no longer safe money, they are encouraged to borrow, and to spend as they go… and then some. The old way was to calculate how much money you earned, look around for what you need, and then when you got your money you would start spending it, every day again keeping track of how much you spent and how much you had left.
Not anymore. People use credit cards, and are encouraged to do so by everyone (popular culture, normal culture, businesses, other people). We don’t buy what we need, what’s then useful and what we - if have money left - want, but on what others think we should have. Basically, a culture of bragging has replaced the old protestant culture of ‘blessed are the poor.’
I totally agree with the 3rd option. However, the conservative viewpoint of where the "blame" lies in my opinion, is correct. People cannot be "taken advantage of" unless they sign on the doted line.
Though any discussion of debt needs to focus on more than credit cards.
Home loans, for example: Perhaps in the past it was possible to save for a house, but given the great run-up in prices something like that is simply not possible for the vast majority.
Or student loans: In the past it was possible to work part-time and have all tuition and living expenses covered. Not anymore, that’s for sure.
I agree that this is a pervasive problem in the US which has gained some form of social momentum. The question is, of course, what do we do about it? The Freakonomics blog touched on this issue recently, and their answer was better financial education in school. We can’t really control pop culture or marketing, so education does seem like one of the few available avenues for making a difference.
Nice piece, Michael. Apparently ideas do have consequences, from top to bottom. Our casual acceptance of debt has eroded much- on a micro and macro level. Ya think the federal government hasn’t been bitten by the bug? No doubt. It mirrors back our cultural embracement of debt.