Economy

How the Self-Help Industry Hustles America

Positive thinking is not going to cure massive inequality or Wall Street predation.

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,  Timemagazine 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 Republicarticle, 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.

Helaine Olen, author of "Pound Foolish," has written for the New York Times, Los Angeles Times, Washington Post, Salon and other publications. She blogs at Where Life Meets Money, and she is the Money blogger for The GuardianUS.