Bank PO RC: PASSAGE 24

Passage: When wealth came into existence, a moral structure was made around money. The Puritan legacy inhibited luxury and self-indulgence. Thoughtful people spread a practical gospel that emphasized hard work, temperance and frugality and the result was quite remarkable. The world has been affluent since its founding. But it was, by and large, not corrupted by wealth. For centuries, it remained industrious, ambitious and frugal. Over the past 30 years, much of that has been shredded. The social norms and institutions that encouraged frugality and spending what you earn have been undermined. The institutions that encourage debt and living for the moment have been strengthened. The moral guardians are forever looking for decadence out of movies and reality shows. But the most rampant decadence today is financial decadence, the trampling of decent norms about how to use and harness money.

The deterioration of financial traditions has meant two things. First, it has meant an explosion of debt that inhibits social mobility and ruins lives. Second, the transformation has led to a stark financial polarization. On one hand, there is what is called an investor class. It has tax-deferred savings plans, as well as an army of financial advisers. On the other hand, there is the lottery class, people with little access to financial planning but plenty of access to payday lenders, credit cards and lottery agents. The loosening of financial inhibition has meant more options for the well-educated but more temptation and chaos for the most vulnerable. Social norms, the invisible threads that guide behavior, have deteriorated. Over the past years, people have been more socially conscious about protecting the environment and inhaling tobacco. They have become less socially conscious about money and debt.

The agents of destruction are many and State governments have also played a role. They hawk their lottery products with aggression, which some people call a tax on stupidity. Twenty per cent of the world’s population consists of frequent players, spending about $60 billion a year. Aside from the financial toll, the moral toll is comprehensive. Here is the government, the guardian of order, telling people that they don’t have to work to build for the future. They can strike it rich for nothing.

Payday lenders have also played a role. They seductively offer fast cash – at absurd interest rates – to 15 million people every month. Credit card companies have played a role. Instead of targeting the financially astute, who pay off their debts, they have found that they can make money off the young and vulnerable. Fifty-six per cent of students in their final year of college carry four or more credit cards. The nation’s leaders have played a role as they have always had an incentive to shove costs for current promises onto the backs of future generations. It has only now become respectable to do so. The market itself has played a role. Software stalwarts built socially useful products to make their fortune. But what message do the salary packages that their top, managers get send across the country when they ignore millions of fellow countrymen who suffer from poverty, malnutrition or hunger? Austerity has become a thing of the past.

The list could go on. But there could be some recommendations. First, raise public consciousness about debt the way the anti-smoking activists did with their campaign. Second, create institutions that encourage thrift. Foundations and religious institutions could issue short-term loans to cut into the payday lenders’ business. Colleges could reduce credit card advertising on campus. The tax code should tax consumption not income. But the most important thing is to shift values. The ‘wise’ made it prestigious to embrace certain middle class, virtues. Now it’s socially acceptable to undermine those virtues. It is considered normal to play the debt game and imagine that decisions made today will have no consequences in the future.