Yankee spirit lost

Yankee spirit lost

Yankee spirit lost

In general, Americans have regressed from those studied by Alexis de Tocqueville in De La Démocratie en Amérique. The Frenchman expressed perplexity at contemporary Americans’ focus on money and attitude toward thrift that passed into parsimony. Conversely, he also recognized that such values were appropriate for a young, developing nation and, coupled with what he deemed equally remarkable generosity, provided a promising foundation, if they could be retained.

A loving critic of his own country and a member of the ancien régime, de Tocqueville agreed with his French contemporaries that the ostentatious displays by the ruling elites pre-1789 helped contribute to their eventual toppling. The potential Charybdis that de Tocqueville observed was that everything in America was (and still is) in rapid acceleration. The United States could achieve in a matter of decades something which had required centuries in the Old World. While such a gift brought great social and economic progress, it also brought, as de Tocqueville foresaw, greater burdens and the potential for greater, more aggressive, and more painful division.

The English have a saying, “three generations to a gentleman,” which means after the initial arrival at affluence, there must be three generations of careful husbandry of all capital, social and financial, and familial cooperation before the third (actually the fourth) generation is secure enough to start reaping the benefits. It is analogous to trying to live independently off the interest garnered from capital investment. Conversely, Americans have a similar saying: “shirtsleeves to shirtsleeves in three generations,” meaning that the third generation after the acquisition of affluence will be back at square one. The adage is a very elaborate way of saying that Americans are not very good custodians. The European cycle of earn, save, invest is not the American way; Americans rather lean more toward squandering the work of a single generation. 

The spending spree mentality, though, is rather new and only became entrenched in the post-World War II period. The late Robert Bork (1927 – 2012), judge, legal scholar, and professor, remarked in his book Slouching Towards Gomorrah that when he returned to the professional sphere in the early 1960s, following a tour of duty in the US Marines, that he noticed both his colleagues and his students had, during his absence, adopted an attitude that vilified thrift and luxury equally. Stuck in a situation where there was going to be judgemental disapproval regardless of choice, those of Bork’s circle, representative of larger American society, chose to be pilloried for spending. The excesses of the post-War prosperity, a time when the odious Thorstein Veblen’s phrase “conspicuous consumption” became reality, appeared to be built on a solid foundation. Needless to say, the good times did not last but in the interval the general American people had fallen out of the habit of saving and investing. Instead, living pay check-to-pay check, regardless of amount, came into vogue.

Currently, Americans are at a crossroads; profligacy has repeatedly failed, but thrift is still not recognized. On the one hand, under the new administration, the markers beloved by experts and politicians as signs of a strong economy are thriving, e.g. the jobs market has grown exponentially to the point that unemployment is now a choice. On the other, the most recent UN report on the US posits that the “Trumpian” economy is “cruel,” mostly because the new restrictions on welfare programmes are indeed going to hit the most improvident. That said, the most recent tax cuts and reduction of regulations, however unsustainable, do offset the entitlements rollbacks, provided that an individual takes advantage of the entailed opportunities to save and invest. This last is unlikely to occur because, as economist Daniel J Mitchell regularly points out on his personal blog, the anti-saving / investing mentality is pretty entrenched in America due to a larger anti-wealth / rich prejudice. 

The consequences of fifty years of unmitigated profligacy, endorsed at the broader socio-political level via imprudent tax deductions, are that when the metaphoric system collapses, the inhabitants think something abnormal has occurred. There is a financial advisor-cum-philosopher, Dave Ramsey, who hosts a daily talk show where those in financial difficulty can call and receive free advice and solutions; it is extraordinarily popular, with an audience transcending political and religious boundaries. Ramsey’s specialty is helping people out of debt, though he is also happy to listen to those who simply want advice on saving and investing. His formula for financial security is quite simple: 1) get out of and stay out of debt, 2) live below one’s means, 3) have at least checking, savings, and retirement accounts, and 4) have a rainy-day fund. While nothing about this mixture is unfamiliar to the rest of the world, for Americans it’s a new language.  

The current problem Ramsey believes is more one of hope and self-empowerment than anything else. For the March/April 2018 issue, Politico interviewed Ramsey, seeking his opinion, as a person who has spent 25 years helping average Joe American, on the current politico-economic climate:          

Ramsey laments about something more fundamental: the loss of a certain kind of can-do thinking among the people who need it most. He is a conservative, fiscally and culturally, and sounds cautiously bullish about the economy under President Donald Trump. But he worries that more and more Americans of all political persuasions have become economically paralyzed, and are mistakenly looking to the government to help them solve their problems.

One might easily argue that an expectation of government assistance is only natural if government was the first to incentivize such behaviour. The problem, though, is more the increasing divide between those who have saved and those who have not:

From the discussions he has every day, Ramsey says, the once-bitten-twice-shy mentality is creating a whole new set of problems. For one, people reluctant to invest have missed out on a long run of stock market success. And it has created a kind of resentment gap. “The S&P went up 19.4 percent last year. But a lot of people did not have money in their 401(k) mutual funds [a type of retirement account] because they lost everything in 2008,” he says, putting air quotes around what he calls an emotionally exaggerated sentiment. “If you have no money in the market, the market could triple, and it doesn’t affect you. It just makes that rich guy over there who I’m mad at that much richer.”

This is the real divide – “that guy over there who I’m mad at” – between the American haves and the have-nots, rather than the fractures portrayed in mediatized reports, such as the UN’s most recent one.

Ramsey sees the “resentment gap” as a product of the American political system:

Today, Ramsey sees more Americans predisposed to economic dependence—and believes politicians are to blame. “I now have to spend more time talking someone into believing they control their own destiny than I used to,” he says. “I don’t know if I blame that all on ‘hope and change’ from Obama, or ‘Make America Great Again.’ They’re both hope slogans. Different ideologies, different politics, but both hope slogans: I’m going to deliver something for you that you can’t do for yourself.”

The issue is that the spend-save divide has become a cyclical tug-of-war that is played behind the scenes during election time. The 44th president promised prosperity of one type and delivered, mostly through overregulation and taxation, with the result that the savers and investors lost, even as the wild spenders saw their jobs and pay checks evaporate. The 45th president promised a smorgasbord of solutions, most of which have worked, and jobs. The jobs have certainly been forthcoming, but, as Ramsey is the first to point out, they are futile if the beneficiaries don’t personally take charge of their finances and build their own safety nets. The real winners have been the savers and investors, especially those who stayed the course following the Great Recession.

 

With the primary beneficiaries of 45th’s tenure being the thrifty, we can expect the 2020 election to become a remix of the social justice, haves-versus-have-nots themes that have characterized most American presidential elections since Ronald Reagan’s final term. In truth, there is quite a bit of scurrying back and forth across the aisle as the electorate, ever the weathercock, begins to scrutinize the fortunes of others while disregarding his own improved circumstances. There is probably no feasible solution for ending the tug-of-war since it would require returning to the austere, puritanical mindset that de Tocqueville found both baffling and attractive. A world in which one is honoured according to what one manages to do without while possessing abundance is now incompatible with the American psyche. Perhaps the 19th century progressives were correct when they claimed that the introduction of financial awareness would create a deadly fault line in the fabric of the US republic.    

 

 

 

 

 

                       

     

 

 

 

 

Mary Lucia Darst

Mary Lucia Darst
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