The fantasy of a vast upper middle class

College isn't for everyone. Neither is the stock market

By Michael Lind

The fantasy of a vast upper middle class

Topics:Economics

Among the many theories exposed as fallacies by the Great Recession is the idea of the mass upper middle class. During the years of the American bubble economy, progressives and conservatives alike lauded the graduation of most citizens from the working class to a new elite that included the majority of Americans.

The center-left and center-right defined this alleged new class somewhat differently. In 19th century Germany, scholars distinguished the credentialed middle class (Bildungsbuergertum) from the propertied middle class (Besitzbuergertum). A similar divide separates America’s progressive elite, based in the educational profession, civil service and nonprofit sector, from America’s conservative elite, based in business and banking. Elite progressives and elite conservatives share the assumption that the ideal society is one in which most Americans would be more like them, in owning educational credentials (progressives) or capital (conservatives).

The elderly in America can remember a long-distant era when progressive thinkers included leaders of organized labor and small-town populist politicians. But nowadays progressive politicians and strategists tend to be affluent meritocrats who got where they are by making good grades at highly selective schools. Their narrow personal experience leads many elite progressives to equate social mobility and increases in income with obtaining academic credentials like their own. While New Deal labor liberals and populists wanted to promote unions and a living wage, many members of the new breed of Ivy League-educated liberal technocrats prefer an alternate plan: send everybody to college.

Progressives love to claim that education is the key to upward mobility. But this is based on an obvious fallacy. The “college premium” that results in higher incomes for college graduates is the result of the relative scarcity of college degrees. If everyone had a B.A., then the value of a B.A. in generating high wages would drop. We know this to be the case, because access to college has expanded more rapidly in Europe, where the gap in wages between the college-educated and the rest as a result is smaller than in the U.S.

Nor is there any basis to the claim, repeated by politicians and pundits of both parties, that most of the jobs of the future require a college education. On the eve of the Great Recession, the Bureau of Labor Statistics identified the occupations with the largest numerical growth in 2008-2018: registered nurses; home health aides; customer service representatives; combined food preparation and serving workers, including fast food; personal and home care aides; retail salespersons; office clerks, general; accountants and auditors; nursing aides, orderlies, and attendants; and post-secondary teachers. Of these careers, only two — accountants and auditors, and post-secondary teachers — require a bachelor’s degree rather than on-the-job training or an associate degree, and only one — post-secondary teachers — requires a graduate degree (a doctorate).

Some have claimed that the millennium of the credentialed class has already arrived. In a 2008 paper titled “The Decline of the White Working Class and the Rise of a Mass Upper Middle Class,” the leading political analyst Ruy Teixeira and the scholar Alan Abramowitz argue that the key factor in contemporary American politics is the expansion of the highly educated, white-collar professional sector. But they reach this conclusion only by truly heroic feats of definition. They are able to claim that 54 percent of the American people are college-educated only by combining the 29 percent who had B.A.’s in 2007 with the 25 percent who had “some college.” Taking a different approach and combining the “some college” crowd with high school graduates produces a more recognizable picture of an America with a majority of workers who have less than a four-year college degree.

The definition of “white-collar jobs” used by Teixeira and Abramowitz is even more generous, including “clerical” and “sales” along with professional. Do receptionists and shoe-store sales clerks in the mall really think of themselves as being in the same social class as doctors, lawyers and corporate executives?

Conservatives of the bubble economy era had their own mass upper-middle-class fantasy. In their version, membership in the mass upper middle class depended not upon educational credentials but upon ownership of capital invested in the stock market. By the beginning of the 21st century, according to some calculations, a majority of Americans had private retirement accounts or employer pensions that were invested in stocks and bonds. In the pages of the Wall Street Journal and elsewhere, conservative intellectuals declared that this made the United States a “nation of capitalists,” an “investor society” based on “universal capitalism.”

Defining janitors with 401K’s as “capitalists” is a kind of social promotion comparable to the elevation by progressives like Teixeira and Abramowitz of shoe-store clerks who dropped out of college into the “mass upper middle class.” Genuine capitalists derive most of their income from the return on their investments or savings, not from labor. By this definition, there are hardly any capitalists in the U.S. Most of the rich are the “working rich,” who derive most of their income from wages or professional fees, not from investments. We are a nation of wage earners, some paid well and others poorly.

A majority of Americans may have some money invested in the stock market, usually through employer pension plans or 401Ks, but it is very little indeed. Forty-three percent of Americans have less than $10,000 in retirement savings and 36 percent contribute nothing to retirement savings at all. Thanks to two stock market collapses in less than a decade, most Americans will be more dependent on Social Security in retirement than ever. So much for the “nation of capitalists” and “the investor society.”

At least the credentials touted by the center-left and the stocks and bonds touted by the center-right could be described with some plausibility as income-generating assets. During the bubble years, houses also began to be seen as income-producing assets, as well as symbols of membership in the suburban upper middle class.

For a generation, most Americans have been told by left, right and center that they would be failures if they ended their educations with high school, worked hard, saved cash for emergencies and bought modest homes they could afford. They have been told that to succeed in life they need to ape the lifestyles of the upper middle class that provides most of America’s politicians, pundits and scholars.

The result has been an experiment in social engineering that has gone horribly wrong: the creation of a faux mass upper middle class. Millions of Americans who by objective standards belong to the working class or lower middle class have persuaded themselves that they are part of the professional-investor elite, because they have worthless degrees from diploma mills, negligible amounts invested in stocks, and suburban trophy houses they cannot afford. For the college graduates at Starbucks working to pay off student loans for degrees that they will never use, as for the millions of Americans who are now “underwater,” owing more on their mortgages than their houses are worth, the American dream has turned into a nightmare.

But many have profited from the peddling of the dream of the mass upper middle class. The claim that everyone should go to college served the interests of the educational-industrial complex, from K-12 to the universities, that now serves as an important constituency of the Democratic Party. (Along with Wall Street investment banks, universities provided Barack Obama with his largest campaign donations.) And the claim that everyone needs to pour money into the stock market, to be managed by banks and brokers who fleece their clients, served the interests of the financial-industrial complex that has replaced real-economy businesses as the dominant force in the Republican Party. Both the educators and the brokers have successfully lobbied Congress to subsidize their bloated industries, swelling them even further, by means of tax breaks for student loans and personal retirement savings. The big losers have been the millions of working Americans whom many Democrats and Republicans alike have persuaded, against their interests, to indulge champagne tastes on beer budgets.

The alternative to the mass upper-middle-class fantasy peddled by Republicans and New Democrats is a return to the older New Deal liberal approach, based on high wages and adequate social insurance. Working Americans should not need to go into debt to obtain college diplomas, in order to share more of the gains of national economic growth in the form of higher wages. And there would be less pressure on working Americans to gamble with their money in the stock market, if Social Security, like public pensions in the rest of the world, replaced a higher percentage of pre-retirement income than the 30-40 percent it replaces today.

An America with a college-educated professional class majority was always a fantasy. So was an America with a majority of affluent day traders. The America we need is one in which all Americans are paid a living wage and guaranteed a comfortable retirement — even if they didn’t go to a university and don’t own stocks and bonds.

Michael Lind is the policy director of the Economic Growth Program at the New America Foundation.

: Michael Lind’s new book, "Land of Promise: An Economic History of the United States", will be published in April and can be pre-ordered at Amazon.com. More Michael Lind

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Get used to living with Mom and Dad

The era of empty nests may be over unless we change our work culture and our economy. An expert explains

By Alice Karekezi

Eugene Ivanov via Shutterstock

Topics:Parenting, U.S. Economy, Economics

It’s a growing trend: More and more adults are living with their parents. According to the Census Bureau, the number of 25- to 34-year-old adults in the U.S. living at home rose from 14 percent in 2005 to 19 percent in 2011. The trend is present in other developed countries across the globe too: In Italy, 37 percent of men 30 years of age and older have never left home; in Japan, men living under their parents’ care are pushing their 40s. Such individuals are easily disparaged as lazy, overgrown babies, content to mooch off their aging parents rather than strike it out on their own. (Remember all those biting jokes Archie Bunker would throw to his “meathead” of a son-in-law.) But are they really?

In “The Accordion Family,” Katherine Newman, a sociologist and dean of the school of arts and sciences at Johns Hopkins University, looks at the dynamics of the boomerang generation – a phenomenon she has dubbed the “accordion family.” Part economic analysis, part ethnography, Newman interviews hundreds of individuals in six different countries (in southern Europe, the Nordic states, Japan and the U.S.), to better understand the international dynamics at work. The major reasons driving adult children back to the nest are economic, she finds: Globalization and the recession are making it harder for new workers to enter the labor force, and the cost of housing is climbing. But other social and psychological factors are at play too. The result is a sometimes rocky, sometimes serendipitous experience for these families as they struggle to redefine adulthood and familial roles in the face of overwhelming global economic forces.

Salon spoke with Newman over the phone about the growing difficulty for young people to find work, how new the idea of being an independent young adult really is, and the surprising emotional benefits of the accordion family.

Is this current generation a bunch of lazy loafers? Your research doesn’t seem to indicate this.

No. They are a generation that has been caught by a series of unfortunate, overlapping trends that put them at a disadvantage for becoming independent the way their parents did. They’re entering a very unfriendly labor market that is particularly punishing to young workers. With the housing implosion in the United States, they’re still entering a housing system in which owner-occupied housing is very expensive. So, they have lower wages, if they have wages at all; they have high housing cost; and, in the advanced countries, there are ever more demanding credential races to qualify for professional employment. If they’re aspiring to be middle- or upper-middle class, the length of time it takes to pile up the education you need to qualify for the jobs to make that possible is getting longer and longer and more and more expensive. When you put all those things together, it’s not all that surprising that the accordion family has developed the way it has. It’s just a bunch of really bad circumstances that have coincided and affected this generation in ways that have not been the case before.

Money is (maybe obviously) a major reason for this trend. How so?

The recession we’re in has intensified a bunch of trends that were already gathering force, and already pushing people into accordion families. Those trends included a real downdraft in the capacity of young workers to find their way. That has really spread as downsizing has gathered force, as jobs have been outsourced. It’s become a much more competitive labor market, and an employer can be incredibly choosy. That leaves young workers at a disadvantage. And as much as they have a hard time qualifying for those jobs, the jobs themselves have increasingly become short-term, part-time or unpaid altogether. Now, to become a qualified professional, many middle-class American kids are going to have to spend many years in completely unpaid internships. So they finish college, or in the course of going to college, they spend years upon years working in jobs that used to pay money and don’t anymore because this market is so crowded. Well, if you’re going to spend years interning somewhere so that you get the kind of experience that will cause an employer to look at you seriously when there’s a paid position, how in the world are you going to manage if you have no income? You’ve got to live someplace. So, in households that can afford it, parents are making it possible for their kids to gather those credentials that will allow them someday – they hope – to launch at the level they’re expecting.

Is this phenomenon the same for lower classes or are there different reasons driving the accordion family trend in these rungs of society?

In poorer households, these accordion families have always been there. There’s nothing new there, because lower-income people have had to pool their incomes for generations, because to keep the household afloat you had to have everybody working and everybody contributing – and by the way, that was true for many middle-class households before the Second World War.

So this period of time which we come to see as normal – of young people leaving home; and spending time on their own before they marry; and their parents having an empty nest – that’s a phenomenon of the post-Second World War period of great affluence. It created a huge boom in wages, and burgeoning opportunities in the white-collar world. We’re not there anymore and we might not be again. We think of it as normal – and I think this is an important point – because the generations that experienced that “normal” are so huge. They dominate the social scene. They’re the baby-boom generation. That was their normal, but it wasn’t normal before them and it may not be after them.

So is this negative impression we have of boomerang children due to fickle memory?

What people think about, what they regard as normal, what they factor in as explanation for how they got where they are really differs from one country to another. In the United States, I came to find that people forget these huge investments that were made by the whole society in the form of, for example, the GI Bill, which really made a difference in the trajectory of those generations. It allowed them to become homeowners; it allowed them to get a college education – the first in their families ever to do so. They wouldn’t have been able to do either of those things if it were not for huge investments that we made, through government, in their well-being. Now, of course, this was seen as a tribute to soldiers – and it was, of course. But when you interview people [of that generation] and ask them, “How did you manage to become a homeowner?” they almost never mention the GI Bill. It’s not that they would deny it if you asked them, but if you just ask them, “Well, how did this happen?” the account is very much one of: “Well, I worked hard. I saved my money. I didn’t go out to eat. I had very modest tastes. The problem with the next generation is that they’re spending money freely and they have expectations that are too high, and they’re not as disciplined.” It’s all down to the personality of the generation rather than these huge economic structures that really do play a powerful role in determining where any individual or family ends up.

The same thing is true when you look at other countries. The Japanese, for example, tend to be very much like Americans: they think every person is the master of his own destiny. So if his destiny is not working out, then he really is to be despised. [These individuals] are the object of disdain. The Japanese tend to look at that next generation that’s living at home and say, “Well, they’re really lazy,” or, “They’ve lost their way,” or, “They don’t know how to be men like their fathers were,” and, “They’re a defective generation.” But you never hear the Spaniards say that because they have a different history and a different political culture, and they are looking for the ways in which government, or big business, or whatever, is to blame because they see themselves as recipients of those forces.

So these cultures, they subtract and they add pieces of their histories very differently, [even though] they’re all suffering from the same economic pressures.

Is there a place that you’ve studied where the self-perspective is healthier or more accurate?

When I started the project, I thought that Americans were sort of unrealistic in the way they thought about things, but when I started looking at these other countries, I decided maybe that wasn’t the case. That’s because now I can see the extremes on either side more easily. I can see how hysterical the Japanese are about [the accordion family trend]; and I can see how comfortable the Italians are with this, and how they don’t think it’s a problem.

So the United States turns out to be the moderate middle. There are some structural reasons why that is the case. We do have some housing that’s cheap – not homeownership, but we have dormitories on college campuses, we have rental housing that people can share with roommates. You’d think that that’s the way the whole world is organized, but it’s not true. In Spain, in Italy, there are no dormitories, there’s very little rental housing. In Japan there’s almost no rental housing. So, if you don’t have the money or the kind of job that you will need to have for a bank to lend you money for a mortgage, you’re not going to be able to move out because you’ve only got two options: You live at home or you buy a house.

You point out that there are very few accordion families in the Nordic countries. Why?

In Sweden, if you’re still at home after the age of 18, something is really wrong with you. I asked people in Nordic countries why they thought that in places like Portugal and Spain young people stayed with their parents for a long, long time, and I was really intrigued by their answers. Their answers had nothing to do with differences of the welfare state, at all. They said things like, “Well, we think maybe they love their children more than we do,” and, “There’s more attachment and affection in their families.” This led to one of the most surprising parts of the research project that underlies this book.

I thought the Nordic countries would look like paradise. These are the places where the problems that produce the accordion family don’t exist because the state has stepped in and cured them. I was amazed to hear the Nordic interviews talk about people being lonely, feeling separated, like maybe they didn’t love each other enough. It made me realize that the flip side of economic dependence, or need, across generations is a degree of commitment and affection and engagement that really isn’t alive in the Nordic countries in the same way. To them the emotional side is very evident and it causes them to be self-critical about whether they’ve gone too far and made it too easy for families not to care for one another across generations because the state cares for you.

Are you advocating for any social reform in the US?

Investment in higher education has always paid off for the United States as it does in the social democracies. Increasingly success in the world economy depends upon skill, training, flexibility, and all of the attributes we refer to in using the phrase “human capital.” Sadly, the U.S has been moving away from investing state resources in higher education at precisely the time when some of our competitors are pushing hard to increase their human capital. If we do not provide access to college for worthy students whose families cannot afford to pay the high cost of higher education, we will be wasting our talent base. So yes, I do think that we should be moving in the opposite direction, as we did with one of the greatest pieces of social legislation in the country’s history: the GI Bill.

How do these attitudes break down between ages?

I think what we’re going to see is that something that started out looking like an [age-specific] trend is going to engulf multiple generations. These labor market rules that introduced short-term and part-time jobs have affected one generation of young people when it began, basically in the mid ’80s. But 20 years later, it’s no longer just one generation [that is affected]. And if this keeps going – which I think it probably will – ultimately this will have engulfed the whole society because all the generations that come up from behind will be affected by the same labor laws. Right now, you’ve got two generations side by side with very different economic realities and very different definitions of a normal process of maturation: you’ve got the baby-boom generation [that] was able to be independent, and then you’ve got the generation coming behind them that inherited a completely different economic world. These two groups are now grappling for what is really normal. What should we be doing? Is it my reality or your reality that ought to count? But if you fast-forward another 20 years, when virtually everyone has been affected by this trend toward short-term employment and high housing costs, it’s going to become the new normal and there won’t be a contrast, and it won’t be age-graded because it’ll be everybody.

Some of the data you’ve collected on the accordion family phenomenon shows that there are more men staying with their parents than there are women doing so. Why do you think that is?

Women seem to be streaking ahead in educational attainment and occupational prestige. That may be one of the least recognized, but most important changes of our time. As they graduate high school and enroll in college at a higher frequency than men, women at the high end of the skill spectrum are starting to outstrip men in their earnings. This may well translate into earlier independence. Of course, in the past, women left home before men because they married at younger ages. Now, however, skill differences born of educational differences may mean men are less prepared than the women their age.

A number of college grads not having a really clear, defined career path are often returning home to “figure out what to do next.” Is this a privilege of class or reflective of a deeper social or cultural value?

Class has something to do with it, but there is something else going on. When I [used to] talk to my grandparents, they never thought that work was something that gave you meaning – it was just the way you put the roof over your head. But suddenly in the boomer generation, you have a very different way of thinking about work: It’s to be valuable, meaningful, honorable, enjoyable, a source of identity. That has now become a kind of standard for the way we think work should be. We have accepted the notion that our children ought to have jobs that are meaningful, not just a job that puts a roof over your head. It’s true that are all these powerful economic forces have set in motion the demand for the accordion family, but it isn’t all about necessity: it’s also about desire, values, what people find useful, what they’re proud of. And every one of these cultures has a different way of defining what kind of future is honorable.

How would you summarize parents’ and their adult children’s experiences living together?

There can be a lot of stress and a lot tension because the program isn’t working if the young people are not moving forward to a future [on which] everyone can agree. [There is], of course, a sacrifice of privacy. You do hear parents talk about how their golden empty nest years disappeared because the birds came back to the nest, or that they’re having to spend a lot of money that they would’ve otherwise saved for their own retirement to pay to take care of their kids for many years longer than they expected to. At the same – because nothing is ever simple – there can be a lot of joy in this.

So these parents who remember having to make sure Mary’s home at night, because it’s 12:30, are not thinking like that anymore now that Mary is 25. So they get their kids back in a different form than the way they had them when they were teenagers, and they’re introduced to the pleasure of getting to know your child again as an adult, [someone] with whom you might have a lot in common.

[Marriage has changed too.] I think we’re seeing a return, in some ways, to the way things were before the Second World War with the rising age of marriage and people staying home until they marry. The difference is they’re taking such a long time to get there – much longer than they did even before the war. In 1938 and thereabouts, you had people marrying in their mid-20s, and then it just plummeted. In the 1950s, the age of marriage in the U.S. for women was about 19 or 20. Now it’s gone way back up to 27 or 28.

What do you think future changes will look like?

I think the changes to come will have to do with what happens when this baby-boom generation is really elderly, because a lot of the resources they might have saved to care for themselves will have been spent on their children’s advanced education and on the preservation of the accordion family itself. And there are big changes that may be coming in 10 years or so, when we discover we can’t afford the nursing home solution such as it was for the earlier generation.

: More Alice Karekezi

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The evolution of American debt

Over the last century, over-borrowing has gone from shameful to commonly accepted. An expert explains what changed

By Hannah Tepper

(Credit: Lightspring via Shutterstock)

Topics:Debt, Economics, American History, History

In the US today, debt is ubiquitous. Whether it’s paying back thousands of dollars in student loans, using your Visa card for a pack of gum when you’re out of cash, or taking out a mortgage on a first home, it’s been woven into our financial system so tightly, that even when we suffer the sometimes cruel and unusual detriments of borrowing, we have little to no realistic impetus to stop. But it wasn’t always this way. In fact before the 20^th century, debt was a taboo, feared, shameful, and kept in the shadows. So what events and institutions brought debt from its meager beginnings to its central role in American life?

In his new book, “Borrow: The American Way of Debt,” Cornell professor Louis Hyman writes, in essence, a biography of American debt. He traces debt through American history: from the late 19^th century, when unpaid dues meant public ignominy, to the 1920s, when the auto industry changed the face of borrowing to the mortgage fallouts that led the Great Depression to the invention of the credit card as we now know it, all the way to the current shambles of our national economic livelihood. Along the way we meet characters like the Henry Ford, the xenophobic inventor of the Model T whose scorn for the liberal age of borrowing got the best him, and Lower East Side grocery clerk Joseph Miraglia, whose miraculous $10,000 spending spree in 1965 made history as one of America’s heftiest credit cart blunders.

Salon got a chance to speak with Hyman last week about America’s long road into debt, the problem with applying morality to economics and, of course, that scene in “Pretty Woman” where Julia Roberts goes on a shopping spree.

Your background is in history and mathematics. How did you become interested in debt?

When I was in graduate school I was fishing around for a history topic that hadn’t been done or worked on before. This was in 2003, before financial history became fashionable again and before people knew there was going to be a crisis.

Little did you know… or maybe you did know, what would happen with the recession?

Unfortunately, as a historian of labor and business, I noticed that a lot of working people were struggling with debt. I thought it was a good topic to get some perspective on. As I got into the topic it was something that lent itself well to the kinds of questions I that interested me. Historians are look at how things actually are, rather than economists who are interested in how things ought to be. My work is in people’s choices, and how our choices are constrained by institutions. It lends itself to a more readable history than just a history of charts and graphs.

In the first chapter of the book you discuss how debt was extremely stigmatized in the 1920s. What was society’s moral view on borrowing then as compared to now?

People approach their checkbook not from a math point of view, but from a moral point of view. I think that’s really a key to understanding all of this. It is shocking how commonplace debt is today, but another difference between then and now is the financial infrastructure of debt. We are told that our grandparents didn’t borrow. That’s not true. People borrowed in the 19^th century, they just did it surreptitiously, illegally, or at the margins. It was always stigmatized. That stigmatization arose out of the belief that a mortgage or a debt could easily bankrupt you, or the economy would change, and you would lose everything. In the 1930s, ’40s, and ’50s the atmosphere around debt changed: New federal programs and financial institutions, from the FHA to department stores, enabled people to borrow more safely. So that fear that everything could be lost went away in the middle of the 20^th century. In the last 30 years that changed again. Those institutions born in this era of growth have persisted into our era of stagnation.

Is debt being re-stigmatized because of our most recent financial crisis?

Absolutely. In the 70s and 80s, it was like in the movie “Pretty Woman”; how glorious it was for Julia Roberts character to use a credit card. That was because most people in the ’80s didn’t have credit cards. In the ’90s, credit card use started to take on a different cast; it started to be seen as somewhat irresponsible. Mortgages maintained that shine of responsible adulthood until the financial crisis. Now people are questioning whether it’s good to go into debt for houses in a way that they certainly haven’t for 70 years.

In the book, you talk about the balloon mortgage and mortgage-backed securities, which had a big part in the economic collapse in the housing market during the Great Depression.

What’s shocking is that the balloon mortgage and the mortgage-backed security are things that we imagine were invented in the last ten years. At least I did before I started this research. But actually, they were commonplace in the 1920s. Banks would issue bonds to local investors who would use that money to lend interest-only mortgages (or balloon mortgages) to consumers. They were called balloon mortgages because they swelled up so that you’d only pay the interest for 3-5 years and at the end of the 3-5 year period you would just refinance it. The thought then was, you’d try to get the biggest house possible and make some money off of it a few years down the line. Banks had access to all this money to lend because they were selling “mortgage bonds” or “participation certificates.” But the bonds weren’t trade-able, they weren’t like mortgage backed securities are today. They couldn’t be resold. As the markets begin to go south after the crash people stopped buying the bonds, there were foreclosures, people started to withdraw their investments, and others were unable to refinance their mortgages.

And then Fannie Mae was created to help the government fund mortgage lending?

New Deal policy makers set up the FHA, the Federal Housing Administration, which created a set of guidelines to ensure that houses would maintain value over time. They set up an insurance system so that lenders would be repaid in the case of a default, to prevent foreclosures. New Deal policy makers created Fannie Mae, originally called the Federal National Mortgage Association, to buy mortgages from local banks and mortgage companies and sell them to insurance companies and other investors. This way there was no longer a need for bonds.

In the book you give some fascinating historical information on how department stores, and later discount stores, changed the way Americans shopped and changed their intuitions about credit.

What’s interesting about department stores is that they are an amalgamation of a bunch of different kinds of stores, clothing stores, appliances, etc. Credit in the department store in the early 20^th century was a service, like delivery. The store didn’t make any money on it at all. That’s the most important thing to realize; that it was not a profit setter. It was something you did because it kept your customers happy. After the war, though, department stores begin to offer what they called “permanent budget accounts.” It allowed people to pay back purchases over many months, and the store was able to charge them interest. By the late 1950s, department stores had more money invested in consumer debt than in their own inventory, so they began to raise the interest rate on credit to 18 percent. It became profitable and they could resell that debt to finance companies. The subcontracting of debt enabled a whole system in which Americans got used to buying on credit and paying interest. Once debt could be resold, discount stores like Wal-mart and Kmart could sell for lower prices and offer the same services as department stores.

You also mention in the book that banks had an essentially trial-by-error process in learning how to profit from credit cards in the ’60s and ’70s. What were some of the regulatory and infrastructural changes that put banks at the forefront of the lending industry?

It’s important to realize that banks were not driving this shift in the ’70s. Banks didn’t come into the credit card industry until 1978 with the Marquette decision, which held that you could charge customers the legal interest rate of whichever state the bank was located in. So banks in states like South Dakota, where you could charge very high interest rates, could lend to people in Nebraska or New York City. That’s when Citibank moved its operation from Long Island to South Dakota, and charged very high interest rates across the country. This shift in the regulatory environment is key as well as the rise of interest rates more generally in the economy during the inflation of the late 1970s.

Why did consumers accept these high interest rates on credit cards?

If you are paying the customary 18 percent a year, it actually isn’t that much as long as you pay off most of your debts every month. And most of the credit cards that were lent in the ’70s and ’80s were to the well-to-do, who could handle the payments.

Nowadays almost anyone can get a credit card, not just the well off. When did that change?

It happened in the early ’90s. Banks continued to get more efficient at lending and their credit models, they believed, got better and better at differentiating between a good credit risk and a bad credit risk. It also became cheaper to borrow so that during the early ’90s from 1991 to 1996, during a five year period, nearly all the expansion in credit card debt was through securitization, when banks resell debt as credit card backed securities, just the way mortgages can be sold again as securities. Because it became cheaper to lend, banks could lend to poorer and poorer people with more vulnerable employment statuses because if these people defaulted, it wasn’t as big of a deal. Statistically, they expected default, and they just thought they could manage those defaults through clever math.

What about the mortgage market in the ’90s? In the book you talk about how an influx of securities into the mortgage market made it ridiculously easy for people to mortgage new homes. How did this lead us into a speculative bubble?

People believed that house prices would go up and that they were good investments. Friends at work, at church, at the gym were telling each other how much money they had made on their houses over the last generation. By 2005 a lot of people bought secondary houses as investments. The speculative bubble happened for many reasons. The most important reason, we think, is that most Americans weren’t making as much money. Median wages stagnated. People couldn’t borrow to invest in the stock market, but they could borrow money from a bank very easily to buy a house. People thought investing in the housing market gave them leverage to make money quickly. You see the collision of a stagnating wage market with a rising house market during a moment of low interest rates. Wages hadn’t gone up for 30 years but wealth had gone up and concentrated at the top, amongst the wealthiest. That money had to be invested somewhere and it looked like housing was a safe, easy way to invest. This money went into houses rather than into business. It went into things that produced nothing rather than things that were economically productive.

You make a really important point comparing the housing market to a Giffen good. A Giffen good is a term, in economics, that refers to something for which demand will increase as its price increases, which works against our typical understanding of the relationship between price and demand.

In economic textbooks, Giffen Goods are described as an anomaly, like a mythical beast or a unicorn that could exist intellectually but never in the real world. But it’s exactly what happened with the housing market: when the price went up, demand went up. The key is that it was not just about borrowers but about lenders. Because there was this ready supply of capital to invest and these lenders were willing to fund all of these mortgages, the housing prices went through the roof. The market wasn’t self-correcting, and there was no equilibrium until there was a crisis.

If it were left up to you, how would you change the way capital is invested in this country? What needs to change?

I think it’s important to realize that we need to use our policies for productive investments. We’ve made it too easy to invest in consumer debt. We can use the same policies to steer money into productive investments. Businesses produce value, they produce jobs, they produce growth, and in our economy, it’s very hard to do that these days. You can get venture capital for fancy high-tech companies, but you can’t get loans for mom and pop operations. I think business investment is something that’s very moderate in a lot of ways from the left and the right. From my perspective it helps us think about how we can actually intervene in the economy rather than just scold people for borrowing too much or being predatory lenders. One of the most important points of this book is to get past moral arguments. We can acknowledge the importance of culture, but I think it’s important to see ways we can actually intervene and make things better.

: More Hannah Tepper

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Kill the zombie banks!

Politicians around the world are still propping up dying financial institutions -- and it's hurting us all

By Yalman Onaran

Topics:Economics, U.S. Economy

The following article is an adapted excerpt from the new book "Zombie Banks," from John Wiley and Sons.

The reason most people today are so scared of zombies could be a fluke of translation. The idea of the flesh-eating zombie depicted in modern-day books and movies originates from a 5,000-year-old epic, in which the goddess of love asks the father of gods to create a drought to punish the man who rejected her love. She then threatens to stir up the dead if her wish isn’t granted. Written in Sumerian, Babylonian, and other ancient languages, naturally there are multiple versions of the epic poem and different translations of those variations. While many translations depict zombies eating food “with” or “like” the living, some drop the preposition all together and have the creatures of the underworld eating humans directly. Zombie banks may not eat people or other banks, but their harm to society, the financial system, and the economy is just as scary.

The origins of the term zombie bank are much more recent than the “Epic of Gilgamesh.” The expression was first used by Boston College professor Edward J. Kane in an academic paper published in 1987. it referred to the savings and loans institutions in the United States that were insolvent but allowed to stay among the living by their regulators turning a blind eye to their losses.The term gained prominence in the next decade when it was more widely used to denote Japanese banks, whose refusal to face their losses and clean up their balance sheets was blamed for the industrialized nation’s so-called Lost Decade. During the financial crisis in 2008, bloggers, columnists, analysts, and even politicians began using it when talking about the weakest banks in the United States and Europe.

In its simplest form, zombie bank refers to an insolvent financial institution whose equity capital has been wiped out so that the value of its obligations is greater than its assets. The level of capital is crucial for banks, more so than for non-financial companies, because in the event of bankruptcy, a bank’s assets lose value faster and to a bigger extent. Thus, when a bank’s equity declines significantly due to losses, its creditors panic and head for the door (deposits are insured in most Western economies, so depositors don’t run away as easily). Capital is the size of the buffer that protects creditors of a bank from losses.

Even though technically, wiped out capital means bankruptcy and rules in many countries require the authorities to seize a lender in such a condition and wind it down, history is full of examples when that was not done. The dead bank is, instead, kept among the living through capital infusions from the government, loans from the central bank, and what is generally referred to as regulatory forbearance — that is, giving the lender leeway on postponing the recognition of losses.The intention is that economic conditions will improve and losses will be reversed; the bank will be able to make profits over time to cover the remaining losses and return to health.

The biggest fear that politicians and regulators have when a bank nears death is the possibility of contagion — that the collapse will spook investors, depositors, and the public in general, causing a run on other banks. So the initial knee-jerk reaction by the authorities is to prevent the fall. Of course, not every failing lender is saved. Small banks around the world get taken over by authorities and wound down all the time; the FDIC in the United States has been seizing one or two every week since the crisis started.

There are two opposite approaches zombie bank managers take as they struggle to bring their institutions back to life. They’ll hoard cash, make few new risky loans, and wait for the slow profit-building to pay for the losses over time. Or they’ll take much bigger risks with the hope that they can make windfall profits to plug the holes. The first was employed by Japanese zombie banks in the 1990s and is faulted for that nation’s Lost Decade, when the economy couldn’t resume growth after the property bubble burst because the banks wouldn’t lend. The latter was the choice of action by many savings and loans zombies in the 1980s in the United States as they “gambled for resurrection,” in Kane’s words. Although some of them won their bets and survived, most saw their losses multiply, making their final resolution even costlier for the taxpayer.

The propping up of institutions that should have died is unfair to healthy competitors. In a real market economy, those companies that take the wrong risks and lose out are supposed to fail, their customers and market share shifting to the surviving firms that were more prudent. In the United States, the credit rating uplift that Citigroup and Bank of America enjoy from their implicit government support lowers their borrowing costs, giving them an unfair advantage over the thousands of small banks that need to rely on their own strength for their ratings. Community banks have to pay more to borrow, because when they mess up and fail, they get taken over and shut down. As the ECB provides short-term loans to Irish banks and other zombies in its region in place of the wholesale borrowing they no longer can access because investors aren’t willing to risk their imminent death, banks that fund themselves through more expensive retail deposits lose out. “The business model that was challenged most during the latest crisis, the wholesale funding model, is being rewarded when it should really be punished, curtailed,” says Antonio Guglielmi, a bank analyst at Italy’s Mediobanca. To compete with the zombies, healthy banks end up taking bigger risks too.

When the zombies offer higher rates to lure depositors, healthier competitors may have to as well so as not to lose customers, thereby hurting their profitability and future health if those rates are unsustainable. The rescuing of failing institutions also creates or increases what’s commonly referred to as moral hazard — the propensity of managers to take risk without considering the negative consequences, since they believe the government will bail them out in case the risks blow up in their face one day. If the executives who run their firms to the ground keep their jobs and their companies are resurrected with taxpayer funds each time, then future executives will have very little incentive to worry about the risk-reward balance that is crucial to the functioning of a healthy market economy.

Letting zombies linger around also leaves the financial system vulnerable to aftershocks following a major meltdown. If the recovery takes hold with no hiccups, everything is fine, but too many times, the road isn’t so smooth. With zombies around, a second shock will drive down the confidence of investors and customers much faster and bring the financial system to the brink of collapse once again. As much as the public might hate the bankers now, the financial system plays a crucial role in the global economy, allocating capital and moving payments around. A frozen credit market, as we witnessed in 2008, can put the brakes on economic growth.

Keeping interest rates at zero in an effort to give the zombies time to heal their balance sheets has many harmful side effects for the rest of the global economy. It’s a wealth transfer from pensioners and others relying on the fixed returns of their savings to the banks’ coffers. That transfer reduces the disposable income for a section of society and thus their spending, which can become a major drag on the economy if it lasts for many years. Meanwhile, the rise in government debt is a wealth transfer from future generations, who are forced to pay for their predecessors’ mistakes. As in the case of Japan, which has kept its interest rates near zero since 1995, it can also settle in culturally, creating expectations of stable or falling prices and cause delaying of consumption or investment decisions. “Twenty years of zero percent interest rates change the psychology of consumers and savers,” says Todd Petzel, chief investment officer at New York fund management firm Offit Capital Advisors. Petzel has calculated that the wealth transfer in the United States equates to $500 billion for each year that rates stay at these levels.

Traditionally, lower interest rates are central banks’ best weapon to stimulate economic activity. The thinking is that companies will borrow and invest when rates are lower; consumers will borrow and spend. Yet when there are zombie banks in the mix, the money provided at the low interest rate doesn’t necessarily trickle down to the consumers or the small enterprises. Zombies that borrow from the central bank at zero would rather lend to borrowers who can afford to pay higher rates since the zombie needs to heal its broken balance sheet as quickly as possible through profits. Thus, the current zero percent interest-rate policy has channeled funds to emerging market economies where returns are much higher, in double digits in some countries. That has caused overheating of their economies and could cause a crash the way Japan’s zero percent policy led to the Asian crisis of 1997–1998 when the free Japanese money found its way to neighboring countries.

Few people have made the connection, but even the events in the Middle East are an indirect result of the monetary easing in the West. Not only have the U.S. and European central banks kept interest rates close to zero, but they’ve also pumped trillions of dollars of extra cash into the global financial system. This policy of so-called quantitative easing has led to commodity price increases, including agricultural commodities. For the impoverished majorities of Middle Eastern countries, small increases in the cost of food can be devastating and served as a catalyst in the uprisings from Egypt to Tunisia. Last time around, when food prices surged, they came down fast with the financial crisis’s onset. This time, the Western central banks are determined to keep pumping money until their banks can earn their way out of death, which can keep food prices high for much longer and lead to further unrest in poor countries.

Bailing out zombie banks can even bring down countries that have been otherwise prudent. Ireland joined Greece in seeking help from the EU in 2010, not because its government spending had been prolific in the past two decades, but because it decided to back its banks that collapsed with the crash of a property bubble. Pumping money into its zombie banks, which have proved to be black holes, almost doubled its national debt and raised fears that it could not sustain paying such a heavy burden.

It’s easy for politicians to make mistakes when faced with a crisis considering that decisions have to be made on the fly, with limited information at hand. Paulson and Geithner have said they had to rescue banks otherwise the world could have faced another Great Depression. Perhaps they were right initially — to prevent a total meltdown, temporary measures were needed. However, once the panic subsides, politicians need to seize the opportunity to finish off the business they couldn’t during the heat of the moment. That hasn’t been done in the three years that have elapsed since the crisis.

Gilgamesh, who was a very good king and loved by his people, made the ultimate error of rejecting goddess Ishtar’s love. The ensuing seven-year drought, which Ishtar got the father of gods to inflict through her threat of bringing back the dead, devastated Gilgamesh’s empire. Keeping zombie banks alive can wreak similar havoc on the world in the next decade. To prevent a lost decade like Japan’s in the 1990s, today’s politicians need to kill the zombies so the drought doesn’t last longer.

: Yalman Onaran is a senior finance writer at Bloomberg News. More Yalman Onaran

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Welcoming the 7 billionth neighbor

Why we should celebrate, not worry about, the planet's growing population

By Berin Szoka

Babies born on October 31st, 2010 in (to left, clockwise) Japan, the Philippines, Nigeria and Russia.

Babies born on October 31st, 2010 in (top left, clockwise) Japan, the Philippines, Nigeria and Russia. (Credit: AP/Reuters)

Topics:Economics

On Monday, the world population crossed 7 billion, with more than one baby in the world’s various time zones getting credit for the milestone. Some mourned this new arrival as bringing us just another step closer to what Paul Ehrlich famously called the “population bomb,” the point at which the number of people on earth explodes beyond the capacity of the plant to support them. But reaction to this statistical event seems somewhat less hysterical than for the 5 billionth (1987) and 6 billionth (1999) milestones. That’s probably because population growth rates have slowed with increased empowerment of women, better family planning, and the rising cost of children relative to their short-term productive value as unskilled laborers. Still, the pessimists’ essential myth lives on in many quarters: population growth makes us all worse off.

The late economist Julian Simon devoted his life to challenging that notion. “Adding more people causes problems,” he acknowledged, “but people are also the means to solve these problems.” Simon’s optimism was famously vindicated in 1990, when he won a 1980 bet with Ehrlich over commodity prices. Ingenuity had driven down prices of the very resources Ehrlich thought would be made more scarce by population growth.

Thus, while most resources are inherently limited, Simon said, what we can do with them is unlimited. “The main fuel to speed our progress is our stock of knowledge, and the brake is our lack of imagination,” he wrote in his 1981 book, “The Ultimate Resource II.” “The ultimate resource is people—skilled, spirited, and hopeful people who will exert their wills and imaginations for their own benefit, and inevitably they will benefit not only themselves but the rest of us as well.”

So Simon would have celebrated the arrival of our 7 billionth neighbor. More people means more minds—more innovators and entrepreneurs working to improve the human condition. Innovation comes not just from the introduction of a technology, but novel uses of it. Thus, while we tend to focus on inventors like Steve Jobs, no less innovative—and heroic—are, say, the fishermen in Senegal who use their cell-phones to find buyers for the day’s catch before their fish spoil, something that used to seem inevitable.

This is essentially the message of Adam Smith’s “Wealth of Nations:” Profit rewards people for meeting unmet needs, thus serving the greater good. Smith’s “invisible hand” drives not only the constant improvement of computing power but the ongoing transformation of even the remotest villages.

Smith’s less appreciated insight is that “the division of labour is limited by the extent of the market.” More people means more buyers, too. “Smith’s point, as economist Steven Horwitz explains, “was that the degree of specialization that one would see in a given market depended upon how much demand there was for the specialized product. Thus, small towns rarely have ethnic restaurants beyond the very popular Chinese and Italian, nor do they have radio stations that specialize in very narrow musical formats…. Larger, wealthier communities can support this degree of specialization because there is sufficient demand, deriving from a larger population and a larger degree of wealth being produced.”

As Horwitz concludes, “production (supply) is the source of demand.” Cell phones are working to expand markets at the local level across Africa, boosting the supply of, and demand for a wide range of goods. That’s also what the Internet does on a larger scale. As Harvard Law Professor Yochai Benkler puts it, “a global network of communications and exchange that allows much greater flow and conversation, so that many new connections are possible on scales never before seen.”

The “wealth” in the title of Benkler’s “The Wealth of Networks“ comes from increased cross-fertilization of minds. Matt Ridley, the self-described “Rational Optimist,” put it best: these networks allow ideas to have “sex” with each other.

Simon’s optimism rested on his belief that “minds matter economically as much as, or more than, hands or mouths.” He would have applauded the “network effects” generated by the Internet as an ever-expanding “market” for ideas.

But just as important is the rising creative potential of each mind through better “training”—not for the kind of “work” done by hands or simply applying “knowledge” that can be memorized, but training for creativity and ingenuity. We need training for mindcraft, argued Lew Perelman, who prophesied the rise of digital learning technologies in 1993. Tapping the creative potential of all seven billion minds requires transforming education from an expensive, rigidly bureaucratic system that produces credentials (and enormous debt for students and governments) into a lifelong process that maximizes the creative potential of everyone. It also requires countering the pessimism that pervades popular culture, right down to the movies and books that inspire our youth.

That culture of pessimism saps the very ambition most needed to innovate out of the very real problems the pessimists worry about. Ehrlich’s crisis-driven mentality also fosters top-down, technocratic policymaking—as if the future were an impending disaster that required emergency planning. The optimism of Smith and Simon is pragmatic in recognizing the challenges of population growth (among other things), but also that these problems can only be solved by more and better technologies generated by more minds working in larger, better markets. Neither minds nor markets can flourish without freedom to experiment with new ideas, technologies and business models.

That holds true for our seven billionth neighbor whether she’s born in Senegal or Seneca, New York.

: Berin Szoka is president of TechFreedom, a non-partisan think tank dedicated to promoting the progress of technology that improves the human condition and expands individual capacity to choose. More Berin Szoka

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I’m envious of other moms

Before my son was born I was fine with what I had. Now I crave nice strollers and chic vacations

By Cary Tennis

(Credit: Zach Trenholm/Salon)

Topics:Economics, Since You Asked, Parenting, Motherhood

Dear Cary,

I’ve been reading your column for years now, and love it. I’m hoping you can use your knack for getting to the heart of a matter to help me get a fresh perspective.

Where to begin.

About three years ago I married the love of my life. My husband and I have known each other 10 years. He is the kindest, funniest, most gentle man that I know. He is also my best friend, and always will be.

While I have a master’s degree (granted, it’s in a pretty useless liberal arts field), he has an associate’s degree from a for-profit school. There has always been a big gap in the amount of money that we earn, but it has never bothered me.

Money was something neither of us have ever felt was that important. We make enough to get by. We buy our clothes at thrift stores, we share an older car, we live in a small apartment, and we go hiking and rent old movies for our entertainment. That always felt right to us.

Four months ago, we had a beautiful baby son.

After my son was born, I became desperate to become a stay-at-home mother. I suddenly realized that it would be nearly impossible for us to afford childcare. On top of this, it would also be impossible for me not to work, given my husband’s salary, which is below the poverty line. My maternity leave has run out and I’m now back at work part-time. I have no idea how we’re going to make ends meet. I adore my son beyond anything, but there are so many days that I wish we had never had him, because frankly, I don’t think we can actually afford him. We do everything we can to cut costs. I feed him breast milk, not formula. We use cloth diapers I sewed myself. We rarely eat meat because of the cost.

What I am really struggling with isn’t so much all this practical stuff. I don’t know how it will all work out, but I can only trust that it will. What I need your help with is the extreme envy that I feel pooling in my chest and eating away at my happiness like some strong acid.

My sisters-in-law on both sides are able to stay home with their children. Their husbands earn large salaries at big corporations. They go on exotic vacations, they have new cars every few years, and they live in large homes in wealthy neighborhoods. Whenever we see them at family events, they are constantly talking about the great concerts and shows they’ve gone to see. The last time we saw them, one of my brothers-in-law mentioned going to see a famous stand-up comedian on his last tour. Later, my husband remarked to me that we’d wanted to see that same comedian, but couldn’t afford the tickets.

I feel like before I had my son, the lifestyles of these other people didn’t faze me. They had more than we did, but so what? We were happy. My husband abhors corporations and is not at all interested in working in the “rat race,” which I used to deeply appreciate. After all, I feel the same way. We both knew we’d probably never be able to afford to buy a house, but we didn’t care. We liked living in our little apartment near a college campus.

But ever since my son came along, I cannot stop envying these people. Their lives seem absolutely, perfectly wonderful in every way. While they get to stay home with their babies, I have to figure out a way to go to a job that I don’t even like in the first place, and pay someone else to watch my child while I’m there. And then hope that at the end of the day, we can still pay our rent. Vacations are something we can only dream of. We will likely never be able to afford to buy a brand-new car. We will live paycheck to paycheck for, well, for the foreseeable future. Meanwhile, I will miss out on my son while I have to go out and scratch just to put food on the table.

This focus on our plight versus the plight of others has overtaken me completely. I lie awake at night thinking about being one of the “have-nots.” I cannot spend time with my relatives or my husband’s without feeling like a complete loser who has failed at life and cannot provide properly for her son. It’s gotten to the point that I pass people on the street and I imagine that they have lives of ease, effortlessly paying bills and looking toward a bright economic future, while we are teetering on the edge of homelessness. I have never told my husband this, but there were times after our son’s birth that I would rock him in my arms and cry, telling him I was so sorry we didn’t think hard enough before getting pregnant, and that he’s been born into a family with a precarious financial outlook.

All this worry and total envy has me unable to enjoy the little things I used to treasure. I take my son to the park and instead of enjoying my time with him, I see other moms and immediately feel envious. Of course they have it better than I do. They must. Look at their stroller, I’ll bet it cost twice what mine did, and I’ll bet they didn’t buy it used on Craigslist. I see my nieces and nephews and think that they will grow up better adjusted and happier because they live in houses, not tiny apartments, and they have moms that stay at home with them. I attend a postpartum depression support group once a week, and several of the moms there are stay-at-home mothers with husbands who make good money. Sometimes in my head, instead of sympathizing with them, I think, “How bad can they have it? They have husbands who make enough that they can stay home. Jeez.”

This envy is turning me into a totally unhappy person that I don’t even like. I feel like everywhere I turn, I see abundance, and when I turn inward, I see lack. It’s eating away at me from the inside, and I don’t know how to neutralize it.

How can I change my outlook and attitude? How do I stop feeling anger and resentment toward others for what they have that I don’t? How do I relax and accept my lot, and enjoy the things that are mine?

Sincerely,

Eaten by Envy

Dear Eaten by Envy,

I love this letter. It gets to the feelings. We talk about the economy but we don’t talk so much about the feelings. My heart goes out to you.

I think the way you will stop feeling so much anger and resentment toward others for what they have and you do not will be to first acquire some gratitude for what you do have.

Make a list of all the things for which you are grateful. Make a long list. Include even silly things. Make a big long list and post it up somewhere where your husband can see it. Let him add to it. It doesn’t have to be just things. You have lungs. Lungs are good. You could include them. You have fingernails too. Fingernails are essential to a happy life. You could include them. I’m serious. Get radically grateful. You may be wealthy before you are halfway through. Or maybe not. You may be angry too. That’s not so bad. I’m pretty angry. But first you have to get happy before you can be angry in a useful way. That’s one of the first lessons of protesting. If you’re angry but unhappy you come off like an asshole. But if you are angry and also joyous you can move nations. The two are not exclusive. A joyous anger can come of knowing what’s what. It helps to have lots of gratitude.

So make your long list of things you are grateful for. Do not forget your eyes. If they are in working order they count. And your hair. You may not think your hair is the greatest hair. But consider the indignity of being bald at your age. If having hair is better than being bald, then put your hair on the list too. Gather your things and look at them. Take them out and enjoy them. If you are grateful for your toes, take them out of your shoes and wiggle them. If there are books and records in the list, take them out and enjoy them. If there are favorite clothes on the list, take off the clothes you are wearing and put on your favorite clothes. If there is a favorite piece of jewelry or ornament, put that on. Have your husband do so as well. You don’t have to go anywhere. Put on your favorite clothes and play with the baby. And do not forget to be grateful to your parents, even if you are mad at them.

Being grateful doesn’t mean be passive. It means be strong. If you are feeling “less than,” if you are pissed off and irritable then you are not as strong as you are when you are fulfilled yet passionately aware of inequities.

What has happened in our country is bad but you will not be able to work on the economy or on social justice while you are still so angry your teeth hurt.

It may be that this unhappiness is a call. Did you ever think of that? Maybe you are supposed to work on social justice. Your unhappiness can be useful to others. In that way, you can become grateful even for your unhappiness, because it led you to your right livelihood. In order to work in your right livelihood you first have to get healthy. So get some gratitude, get healthy and kick ass.

Then you will be able to work on getting more money. Which is certainly worth doing. There are many experts and much wisdom in that realm. You could start by reading “Your Money or Your Life,” and “The Lifelong Activist: How to Change the World Without Losing Your Way.”

This will take a while. Meanwhile also get angry. There’s no harm in that. I still envy those who have more.

You and me both, huh?

Cary Tennis is Salon's advice columnist. His latest book is "Citizens of the Dream: Advice on Writing, Painting, Playing, Acting and Being." He leads writing workshops and creative getaways, and occasionally tweets and bellows as @carytennis on Twitter.

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