The implication of the report—that it would be better were these people to have saved extra money, rather than spending it on things they desperately need—is both unrealistic and distasteful.
I thought that the main implication of the report is that there are a few people with a pile of money while there are a whole lot of people with not very much at all. That’s what I find most distasteful.
Rich guy sees a special offer on Rolls Royces one day - limited offer, down to £100,000!
He checks his wallet. Damn! Only £99,999.99 in there.
So he stops the first person who passes him in the street outside the dealership. “Excuse me sir, can I please have one penny?”
“Sure,” replies this individual. “What do you want it for?”
“To buy a Rolls Royce!” declares rich guy.
“I see,” comes the response. “Well, here’s twopence. Get me one too.”
Debt isn’t necessarily a bad thing, either. As others have said, it’s complicated.
Having grown up around millionaires who at various points had greater debts than assets but still lived in giant waterfront houses, rode around in yachts on the weekends, and drove around in extremely expensive cars, it’s pretty clear that things are more complex. Debt is a result of leveraging credit. Leveraging credit per se is not inherently bad. If you have a very large access to credit and know how to leverage it sanely, you can build up a lot of wealth, and the typical way to build wealth to invest credit into education, starting a business, etc. The problems come up when you either are using credit to dig yourself into a hole you’ll never be able to climb out of (insane college tuitions/predatory college loans are really hosing people over there, though there’s also social pressure among normals to keep up with the Joneses, and bad spending habits), or are using credit to pull yourself out of a hole due to life’s many surprises (medical debt/legal debt/etc.).
This is often not a choice for many people. I think that’s the crux of the problem, that the people who have to depend on debt to help themselves often have little choice in the matter, where as people who already have resources have far more choices about how they employ debt in their financial lives.
Oh, absolutely. Student debt loads today are astronomical (and obscene), housing costs in many areas are hideous and can bury people, and there’s a lot of stupid debt in the US from the lack of decent social safety nets, esp. medical debt, and other ways life can just whack you (accidents, insurance gaps, employment gaps/unemployment, legal nightmares). There’s also a lot of predatory lending targeting people who either don’t have other options or don’t know they’re being taken for a ride. There’s a huge amount of reform that’s long been called for across the board, esp. to help and protect the poorest who are the hardest hit by the system.
Still, you can see a guy riding around in an limo wearing an Armani living in a penthouse heading to a dine at a three Michelin star restaurant who’s underwater, and they’d still count towards that Oxfam stat. Trump was underwater a bunch of times in the 90s but still riding around in his private jets.
But I think the difference is that the people who are like Trump and in debt came from a background that allowed them to do that - because of their family connections and backgrounds. The poor person in debt didn’t come from $$$… So I don’t know, that seems to change the dynamic.
Also, this:
I remember reading this book many years ago, If Women Counted, by Marilyn Waring https://en.wikipedia.org/wiki/If_Women_Counted
Her main point, as I recall, is that economic development by groups such as the World Bank, WTO, etc focussed mainly on projects that would create monetary gains to GNP. ie building a factory. They ignore non-monetary quality of life factors such as access to water, cooking fuel, childcare etc. which are largely the domain of women.
I was a poor student of economics, and it may be sour grapes, but I found the field to be largely morally bankrupt and more of a rationalization of capitalism and neoliberal economic practices; all while promoting itself as a “science”.
Of course it is complicated, and people love to simplify things.
I think the problem is mostly that have to be better ways to gauge wealth than net worth (which not only can be totally misleading, but also can be hidden). I don’t know what they are, but if you searched you could probably find an affluent suburb and a very poor apartment complex where there was less net worth in the 'burb. It’s a misleading metric.
Access to credit and leveraging credit are usually positive things since you can invest in future economic security if you have them (education, starting a business, investing in other things that can help ensure future prosperity), but the higher your socioeconomic status the better the credit (and connections) while the poorer you are the worse your credit and the more brutal the lenders are, which puts a lock on social mobility. Stupid things like student debt, socioeconomic biases on access to higher education, and other systemic garbage also add to that, which is why the US has such incredibly poor social mobility. But the problem as I see it is that too many people are locked out of decent credit (and education, and job opportunities, and so on), more than that people leverage credit.
i live in the fairly odd position of being wealthy by the oxfam standard: i bought a cheap home, and it’s worth lots more than i paid for it. my job however pays very little. having a nice dinner out is a five dollar burrito with a three dollar beer.
im definitely a lot more well off than some, and my place is my only debt, but i’m still not exactly living the dream. ( even if the aca recently allowed me to see a doctor when i needed to. which was grand. )
So if my math is right I can wipe out 200% of the world’s poverty with those nasty pennies stuck to the bottom of my cup holder. That’s tempting but those pennies are really gross.
I’m probably less Oxfam-wealthy than you; but I’m in a similar boat. No debt, some savings; unemployed except for some erratic contracting gigs, medical expenses helping eat into those savings.
Apparently I’m totally livin’ large compared to the sucker with the mortgage.
Given that returns to capital have just gotten juicier since the industrial revolution(more or less throughout history if you count land, and the original ‘rentier’ class); I agree that ‘odds of ever actually having wealth in the financial sense’ is an important thing to measure; and the fact that it is so unevenly distributed is not good; but it’s an atrocious proxy for quality of life, humand-development-index, purchasing power, etc.
It is complex. I was brought up to understand that credit is a useful tool but not a lifestyle. It’s advice that’s served me well, but it came freighted with a few assumptions: first, that I’d have access to credit (many don’t); second, that it was very unlikely I’d ever have to use it to purchase day-to-day necessities (e.g. rent and food); and third that I had the financial literacy to use the tool wisely (an education not provided to Americans by the public K-12 system).
Debt with the ability to pay it back isn’t really a hardship easily. It is just a method of business. Too many people, self included, get too deep in debt thinking they will make more money in the nearish future and be able to pay it off faster.
IIRC early banks rarely loaned to average people. They loaned to rich people. Why? They have money and assets to pay them back for sure. The founder of the Bank of America (originally The Bank of Italy) was one of the first who advocated loaning money to average working class people who were of good character and had a job.
Heck when I was talking to a friend in college, who I believe cashed out at or near 7 figures in a business a few years ago, he was even telling me that if he won the lottery he would keep it all in the bank, and then get what ever capital he needed as a loan to start a business. He would get the best rates and highest amount possible because, in simple terms, he didn’t NEED a loan.
I’m not even talking about people like us, who probably have more resources than the working poor (even if we have some debt, we probably have some bulwark against completely being flat out broke). There are people who are a disaster away from homelessness, and debt becomes an way to just get through the month. I think there is this tendency to just assume that all kinds of debt are the same and I don’t think they are. Access to cheap credit is a luxury, I think and has you rightly point out, who can have access to that debt has vastly expanded over the years.
I think this indicates that there is a cultural problem here - that our culture makes us think of debt and credit in particular ways, that we can catch up later. But I think that the times have changed and our ability to pay back loans (from the middle down, anyway) has vastly decreased.
So, I don’t know what the answer here is, because easy credit has become a way of life that too many people have to depend on for the basics of life (or what we consider the basics).
Much of the debate and confusion in this thread revolves around the difference between secured and unsecured credit. Debt on a house, assuming its not under water, does not mean that you have a negative net worth. Were you to liquidate the asset you would have cash for your equity portion. Borrowing to throw a big wedding on the other hand leaves you nothing but debt. Fear of the latter kind of debt has hampered a lot of people from taking advantage of the banking system.
This reminds me of an anecdote that Ivanka Trump once shared in an attempt to (I think?) make her father seem more relatable:
I remember once, my father and I were walking down 5th Avenue, and there was a homeless person sitting right outside of Trump Tower. And I think I was probably nine, ten something like this, it was right around the time as the divorce. And I remember my father pointing to him and saying ‘That guy has $8 billion more than me.’ Because he was in such extreme debt at that point. And me thinking ‘What are you talking about?’ He was sitting outside of Trump Tower, and I didn’t understand. I just thought about it a year or two ago and thought it interesting. It makes me all the more proud of my parents that they got through that.
Imagine the mindset of a person who can take the elevator down from their gilded penthouse apartment, see a homeless person in the street and feel nothing but bitterness and self-pity instead of compassion.
Bingo.
The ability to utilise debt financing at non-usurious rates is itself a sign of fairly high-grade privilege.
We need to figure out how to account for this in the mathematics of inequality.
And the mathematics of scams. Trump was allowed to complete the Taj in Atlantic City because he claimed he could get great interest rates and wouldn’t need junk bonds. Then, once he got approved, he used junk bonds. The Taj went bankrupt, but Trump himself got paid. So people can borrow money for their company, have the company go bankrupt, and still make money. Being a rich business man makes relying on assets to debt ratio completely wonky.
Oh, what a shitty person…
