Here’s what I prepared for the big debate in Philly on August 2. I made the points, but never delivered the text. Probably just as well.
It’s true, I’m the guy they hired to argue against thrift, which is of course the title of my recent book; it can be purchased if not consumed tonight, in this very room. You can use a credit card. At the outset, lest we forget my larger purpose, let me remind you of the subtitle: Why Consumer Culture is Good for the Economy, the Environment, and Your Soul. Less provocative, right?
For most of you in tonight’s audience, these words are no less mystifying or incendiary than the main title. For they’re up against a deeply rooted cultural tradition that assigns feminine passivity to the consumption of goods and manly activity to the production of goods—luxurious decadence on the one hand, spartan diligence on the other. I’m not playing the gender card, I’m reminding us that this either/or presents an impossible choice. No human being can commit to one or the other and still pretend to be a resident of this planet. But we keep telling each other that we can, or we ought to. Why? How does George Bailey become a culture hero by living a virtuous life of thrift against his own stated wishes—sullenly, even angrily deferring his own gratification until, having been ruined by Mr. Potter, the big banker, he decides to kill himself?
The cultural tradition I invoke here includes but it not limited to the Protestant Ethic, which has instructed us since the 16th century to stay in our callings, at work, where, as Luther insisted, God will lay cross enough upon us—where we will learn that freedom is not release or abstention from the world of necessary labor and material circumstances, but is rather what we experience when we work hard at changing that world. By the mid-19th century, in these very parts of the western hemisphere, abolitionists used this insight to indict slaveholders for stealing their incomes from the sum of value produced by those in bondage—for consuming without producing anything of value. By the late-19th century, working-class leaders of labor movements indicted capitalists on the same grounds. “Jay Gould never earned a great deal, but he owns a terrible lot,” as a member of the Knights of Labor explained to a Senate Committee in 1883. Today we denounce bankers, lawyers, bureaucrats, and professors on similar grounds—they’re middlemen, parasites, and pointy-heads who produce nothing but paper, and yet they collect handsome salaries and, in some cases, they take the summers off.
But as I say, the cultural tradition I’m up against transcends the Protestant Ethic. It’s the larger social milieu we call modernity, the post-feudal moment when productive property became the material foundation of the self-determining personality, and markets became the means of pricing and conveying such property—this new self was now grounded or stabilized by its location in space, and yet its material foundation was also subject to the temporal vicissitudes of the market. Commerce had become both the necessary condition of your self-mastering personality and the constant threat to the durable good of your character.
That new model self had then to be thrifty. He had to hedge his bets, save for a rainy day, defer gratification, delay desire, because those vicissitudes of the market were unpredictable at best. By the 18th century, you could see farther into the future as enforceable contracts came to regulate more and more social relations, but without some savings, some bulwark against the unexpected, you were still at the mercy of the market.
In the early 20th century, Max Weber and Sigmund Freud made a special study of this specifically modern, always anxious character type, probably because in their time, as in ours, real alternatives were emerging: Weber called that character type ascetic, giving it a religious connotation, Freud called it anal-erotic, giving it a scatological significance that only the writers at “South Park” still seem willing to explore. Marx labeled it the bourgeois individual—the man who believed in Liberty, Property, Bentham—and the common law designated it the “man of reason.” David Riesman later settled on the “inner-directed individual,” and his comrades from the Frankfurt School identified its opposite as the “authoritarian personality.”
Call it what you want, this modern character type able to abstain from desire remains the gold standard of civilized comportment, whether the subject is parenthood, citizenship, or everyday interpersonal relations, unless of course you’re a player on reality TV, where Mandeville’s “Fable of the Bees” has come to dramatic life as something other than satire. Republicans and Democrats alike want to return us to this gold standard—that’s one reason they’re all so enamored of small businessmen, the last of the self-made, self-possessed men. Unlike us post-modernist deconstructionist academics with tenure, these people know how to restrain themselves.
When I claim that I’m against thrift, then, I’m suggesting that this modern character type has outlived its usefulness. To make that suggestion is to say that, once upon a time, thrift was useful—it was, in fact, good for something—but that it has now become an impediment to what we want from ourselves and for ourselves. How so?
I do not here invoke the “paradox of thrift” made famous by John Maynard Keynes, through which the virtuous saving of individuals means a reduction of aggregate demand. I do not argue against thrift on the grounds that your saving has caused my unemployment because the consumer demand that your spending once created might have kept me on the job at Starbuck’s, and has meanwhile reduced the tax revenue of the city, which has led to layoffs of public employees and so another reduction of consumer demand. I’m not asking you to spend on my behalf, or for the good of the community. I’m not writing a grant proposal.
No, my question is more historical, and I would like to think more dangerous. What is thrift good for? What are its purposes?
In the distant past that I have invoked, thrift—all that saving for a rainy day—was good for economic growth, for social mobility, for geriatric grace, and for the psychological (or is it cultural?) task of constructing post-Oedipal adults capable of deferring gratification on behalf of future generations.
Economic growth. The savings of individuals flowed into commercial banks as deposits, which were then loaned to businesses in need of capital or cash flow, and this postponement of consumption promoted growth—by transferring income from where it wasn’t needed to where it was. But this process has been overrated. By the early 20th century, by the time working people had enough income to save, rather than just buy life insurance—until then, 90% of their wages were spent on the necessities of food, clothing, shelter—the banks, all of them, were awash in money, and so were the corporations that had become the dominant structural element of the new economy. They didn’t need your savings, not even as stock purchases, and since then they never have. Raymond Goldsmith and Simon Kuznets figured this out fifty years ago.
Economic growth does NOT require either your thrift or the savings we call business profits—the portion of the national income withheld from consumption for investment, like seed corn saved from the crop that goes to market and that, when sold, becomes the farmer’s income. Since 1919, corporations have been able to finance improvements in the productivity of their capital stock without using their profits—the replacement and maintenance of that stock out of depreciation funds has been enough to drive growth in productivity and output. So the savings we call business profits have become pointless or destructive. The savings we call your bank accounts are even more pointless if the subject at hand is economic growth at a macro level. Nobody except you needs your savings, and shortly I will explain why you don’t need them, either—or rather you can’t need them.
Social mobility. In 1858, Abraham Lincoln addressed the Wisconsin Agricultural Society—he was trying to gain spiritual leadership of the new brand new Republican party, whose leaders were considering the possibility of running Stephen A. Douglas, the Democratic senator from Illinois who sponsored the Kansas-Nebraska Act of 1854, as their presidential candidate in 1860. Lincoln explained in his address that we have “no permanent class of mudsills” here in the industrious North, and if we did, the apologists for slavery might be right about the moral superiority of their system at the South. No, what we have instead, Lincoln insisted, is social mobility.
“Many of you independent men in this very assembly were just last year hired laborers,” he said to great applause; nobody bothered to ask why a hired laborer wasn’t an independent man, and Lincoln didn’t bother to explain the sequence: everybody understood it. It went like this. When you worked for someone else, you rented your free will to a boss—while you were on the job, he was in control of your human capacity to produce value through work. But you saved some of your wages every payday, and eventually you had enough to quit the job and start your own business, to be your own boss. Then you were an independent man, free and clear. You had to be thrifty, in other words, to become a self-determining property holder in your own right—to become a genuine self, a real man, by taking possession of yourself.
We don’t think about social mobility or economic independence in these terms anymore. The self-made man is a rare commodity—he’s that elusive small businessman both parties pursue with such reckless tax incentives. Social mobility now means career success, which means a climb up the job ladder and a better salary, not owning your own business, being your own boss.
So why does thrift still regulate our thinking about what we ought to be doing with our earnings?
Geriatric grace. You save for a down payment—you start a family, you create a home, you hope that your equity lets you cash out when your kids need the money to start their own families. And you save for retirement—you try to avoid penury in your old age, hoping your savings will be asset enough to place in you in a nursing home this side of Bedlam. How could anyone argue with these purposes of thrift?
Here’s how. The housing market as it devolved in the last twenty-five years was animated by imaginative mortgages, shall we say, which reduced the importance of down payments by back-loading interest and principal, eventually escaping even elementary calculations on the capacity of buyers to pay. The collapse of that market is not a momentary blip, however, because it was caused by the stagnation of median family income since the 1970s—people borrowed what they couldn’t earn, and not only in the mortgage market. Until the gross inequality of income distribution is rectified—until fiscal policy addresses the unemployment crisis, just to begin with—buying a home, and counting on the increase of your equity stake in it, is a fool’s errand. This purpose of thrift is a losing proposition.
But surely you must save for your retirement! Well, no, you can’t need these savings because they’ll never be enough. To preserve your standard of living after retirement, you must save 20 times the amount of your annual income, which translates as about 5 percent of your income over forty years. But wait, what if, like me, you’ve saved closer to 15 percent of your salary over the last twenty years, dutifully hedging your bets? It doesn’t matter, because your retirement account can lose 35 percent of its value overnight, as mine did between September of 2008 and April of 2009. Then what? Work longer, save more? I’m lucky enough to have a job that has no upper limit on my age at retirement—I have colleagues who are still teaching in their late 70s. Most people aren’t so lucky.
In short, you can’t retire comfortably if all you have to rely on is your own thrift. So much for frugality. Social security can supplement your savings, but as we all know, this is a meager resource. What you need is luck—the lottery, say. Either that or we need to socialize our saving for the rainy day that arrives when we have to stop working. That’s right, if we’re not willing to count on luck, we need to pool our savings, to make sure that everyone can retire in dignity with a guaranteed income. We already guarantee each other’s bank deposits via the FDIC, and we have already socialized the big banks’ losses from 2008 and 2009. Why not complete the agenda we’ve set for ourselves? Why not use a mandate, as in health care, to socialize rather than individualize the costs of retirement, which come with the end or the loss of income from work?
And that leads us, finally, to the psychological question of character. As we’ve seen, thrift is pointless if our purposes are economic growth, social mobility, or geriatric grace. But surely thrift underwrites character formation, by teaching us the value of delaying desire, deferring gratification, staying on the job, thus showing us that the discipline of sacrifice in the present creates a better future? Industry, as David Blankenhorn has put it: work hard now, and you will benefit later, as will your children. Not just because you and they will have more income and wealth, no, because you will be better people—better equipped to weather the storms of temptation, better able to calculate the wages of sin, better situated to experience the indignities and idiocies of old age.
Once upon a time this belief in thrift, clearly the adjunct of work, made sense. No longer. And that is because hard work can no longer function as the index of our worth as individuals. Why not? Three reasons. First, there’s not enough meaningful work to go around. College graduates are living at home and working at Starbuck’s, skilled machinists meanwhile go begging for work because their jobs have been robotized or sent south, to the Carolinas, Mexico, and beyond. That’s not a blip, either, that’s the future. Thomas Friedman is not a deep thinker, but he’s right that the world has flattened out.
Second, the insanely inflated incomes of Wall Street traders, brokers, analysts, and other insiders have demonstrated that there is no transparent or even vaguely proportional relation between effort and reward, real work and actual income, as the quaint notion of “industry” would require. The traders, brokers, and analysts have proved that hard work is a joke—that millions are to be made from fraud, chicanery, and double talk, and that meeting your everyday responsibilities to your boss and your family, just staying on the job, is another fool’s errand. In this moral climate, crime pays: it’s rational to violate the boundaries of civilized comportment. Character of the old-fashioned kind is a liability.
Third, you can work as hard as you want, or as David tells you to, and it still won’t be enough to pay the bills, no matter how thrifty you are. That’s what the stagnation of median family income since the 1970s means. Since then, consumers—who also happen to be workers—have relied on a couple of devices to supplement those stalled earnings. On the one hand, they’ve borrowed. Household debt far exceeded household worth as early as 2001, but this was simply a way of bridging the gap between necessary expenditures and real wages: it wasn’t a moral failing that signified the repudiation of thrift. On the other hand, workers (also consumers) have gone on the dole. Since 1959, government transfer payments have been the fastest growing component of labor income (about 10 percent a year), and by 2012, they amounted to 20 percent of all household income in the US.
Consumers are now “deleveraging,” paying down their credit card debt (as student loans surpass this sum), but neither their thrift nor their character will help them climb out of the hole dug by Wall Street. This crisis, which calls into question the very meaning of work, cannot be addressed by appealing to the virtues of the self-made, self-possessed man of the distant past, as if it’s 1719 all over again and Cotton Mather is here to convince us that sin and debt are the same transgressions against God’s will.
To honestly address this crisis is instead to treat it as an intellectual impasse as well as an economic problem. We won’t be able to think our way beyond the present until we relinquish our claim on the personality type we have inherited from the past—the type that believes his character is built on the foundation of thrift.