FAIR MONEY

Face to Face with Inequality

Author Archives: Jeffrey Greger


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Calling for Humanism

Peter Buffett has a spot-on op-ed in the New York Times today, in which he calls out the complicity of philanthropy in a culture of exploitation and inequality, by which the right hand gives a little philanthropy as a sop to problems the profit-mongering left hand has created.

Especially relevant to the mission of FAIR Money is his indictment of philanthropic financial services to the poor:

“Microlending and financial literacy (now I’m going to upset people who are wonderful folks and a few dear friends) — what is this really about? People will certainly learn how to integrate into our system of debt and repayment with interest. People will rise above making $2 a day to enter our world of goods and services so they can buy more. But doesn’t all this just feed the beast?”

Buffett says he is not calling for an end to capitalism, he is calling for humanism.

FAIR Money has started talking about what it takes to empower people (of all levels of income) to participate financially on their own terms. In Buffet’s words: what does it take to stop feeding the beast? I hope we can arrive at an answer using a thoughtful, inclusive, participatory process.


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Paying for Educational Value

Oregon is considering the pros and cons of an Australian model of paying for college education after the fact. In this model, students pay no tuition. Instead they pay a small percentage of their income post-college, regardless of how much they make. In essence, how much they pay is directly related to how much college was worth to them, which makes a lot of sense on the face of it. I wonder how it changes the students’ experience of their education and the educational institution’s conception of what and how to teach students. I was able to find a study of “participation rates,” which doesn’t answer my questions, but it does show an overall increase in men and especially women getting a college education, but no increase for students from low-income backgrounds. Perhaps that has something to do with financing living expenses.


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The Moral Hazards of Too Much Money

If you think the pursuit of happiness is essentially a private affair, then recent research findings regarding the impact of inequality will make a hash of your most cherished beliefs. A Greater Good article summarizing the research on inequality points out that people are happiest and most compassionate in countries with the least inequality. And it’s not the poor who are short on compassion, but the wealthy. People who are significantly wealthier than others, it turns out, are not only less generous but also more apt to drive over hapless pedestrians who find themselves in a crosswalk when the wealthy come barreling down the street. People who are given an obvious advantage in games of monopoly still think they are brilliant and deserving when they win. Food for thought. 


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Give students the same interest rates on loans as the big banks

There is an Elizabeth Warren sponsored petition winding its way through MoveOn.org aimed at putting pressure on congress to reduce the interest rate on student loans.

While reducing the interest rate would help with short term problems related to student loans, it doesn’t broach the broader question of why higher education in the United States is organized in such a way to require taking on so much debt. It will take more than a petition to force that question front and center.


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Organized Money

In his new book The Unwindings, George Packer talks about “the default force in American life, organized money.” That rings so true and is so elegantly put, I felt compelled to look it up. In fact, it appears, FDR originated the phrase “organized money” and said it was as dangerous as the mob. I think we now know it is actually more pervasive and more destructive, but it certainly is interesting that the threat was apparent in 1936.


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Homeless in Silicon Valley

Moyers & Company aired a segment on homelessness in Silicon Valley this April. Moyer’s observes in the prelude:

California’s Silicon Valley is a microcosm of America’s new extremes of wealth and poverty. Business is better than it’s been in a decade, with companies like Facebook, Google and Apple minting hundreds of new tech millionaires. But not far away, the homeless are building tent cities along a creek in the city of San Jose. Homelessness rose 20 percent in the past two years, food stamp participation is at a 10-year high, and the average income for Hispanics, who make up a quarter of the area’s population, fell to a new low of about $19,000 a year — in a place where the average rent is $2000 a month.

All of the above is true, but it doesn’t capture the full range of economic inequality in Silicon Valley. The phrase “hollowing out the middle” Moyer’s discusses further on is more accurate. That term describes a process which has largely gone unseen and unheard in Silicon Valley, but which affects people across a surprising range of income brackets and occupations. Over the course of the Fair Money project we found people struggling at income levels in the six figures as well as at income levels far below that level. Homelessness is up in Silicon Valley, but homelessness is only the most visible example of a more general process.

Nor does Moyer’s segment do justice to the ingenuity and innovations deployed by those facing harsh economic realities. People do not passively accept their circumstances; they actively transform them. While the phrase “hollowing out the middle” and the signs of homelessness grab headlines, the process of filling in the gaps and getting on with living is a hopeful accompaniment.


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Rising Poverty

The Brookings Institution just released a report showing a 64% increase in poverty in suburban America between 2000 and 2011. (While the headline focuses on the suburbs, the cities saw a 29% rise in poverty, which by any reckoning is newsworthy in itself.) An infographic offers a quick synopsis, which talks about implications in terms of policy (mentioning schools and transit). The implications for the people in question undoubtedly are much more complex than that.


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The Lure of Stuff

A.O. Scott has an article about recent movies celebrating luxury goods, which offers an explanation of some of the behaviors we have seen in our research. Scott doesn’t offer any of the knee-jerk judgments about materialism that we are all prone to, at the same time that we feel the lure of beautiful things. Holding back the judgment is undoubtedly key to defining and building structure around what we want and may not be able to afford. The piece also reminded me of the work of Daniel Miller, who has studied the meanings of our stuff for a long time and concludes that the ability to find meaning in things is strongly connected to our ability to find meaning in relationships to other people. In The Comfort of Things, he writes “All my academic studies have shown that the people who successfully forge meaningful relationships to things are often the same as those who forge meaningful relationships with people, while those who fail at one usually also fail at the other, because the two are much more akin and entwined than is commonly appreciated.”


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Preying on Would-be Retirees

The New York Times has an article about “pension advances,” which may carry interest rates as high as 106 %. Here’s a little extract: “A review by The New York Times of more than two dozen contracts for pension-based loans found that after factoring in various fees, the effective interest rates ranged from 27 percent to 106 percent — information not disclosed in the ads or in the contracts themselves. Furthermore, to qualify for one of the loans, borrowers are sometimes required to take out a life insurance policy that names the lender as the sole beneficiary.”

lumpsumHere’s the website of the most polished one I could find. The company is mentioned in the NYT article. They seem to go to some length to make it appear not to be a loan–possibly because a loan is associated with an interest rate, and people might make uncomfortable inquiries when they realize they are taking out a loan. If you visit the website, a rep will attempt to chat with you after a few seconds. Maybe we should try it and see what they have to say for themselves.


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Anatomy of Predatory Credit

Predatory lending in a nutshell

Predatory lending in a nutshell

The Pew Research Center’s payday loan infographic is helpful, but it doesn’t quite show what sort of a trap you fall into when you borrow the same $375 loan over and over again without ever paying off principal. Their latest study on the payday loan industry reports that only 14% of typical payday loan borrowers have room enough in their budget to pay off the loan in full. Another interesting finding from the same report is that 27% of payday borrowers also end up with overdraft fees from the bank when the payday lender withdraws the full amount of the loan. That would mean you pay $85 or more for the privilege of disposing of $375 for the duration of two weeks.