Archives For personal finance

Benjamin Barber (the author of the polemic, Jihad vs. McWorld) has an editorial in the LA Times today.  Its title is:  “Overselling capitalism: Why today’s markets are headed for disaster unless there is a shift in focus.”  At first the editorial looks like a pretty standard entry in the growing line of comments suggesting we deny credit to the poor–you know, for their own good.  But then it really goes off the rails.  Can anyone explain to me what this means:

Capitalism’s success, however, has meant that core wants in the developed world are now mostly met and that too many goods are now chasing too few needs. Yet capitalism requires us to “need” all that it produces in order to survive. So it busies itself manufacturing needs for the wealthy while ignoring the wants of the truly needy. Global inequality means that while the wealthy have too few needs, the needy have too little wealth.

Huh?  “Too many goods” and “too few needs” implies a baseline.  Does anyone (least of all Barber) know what that baseline is?  In what way does “capitalism” require us  to do anything?  What does that even mean?  And how could it possibly be the case, giving the most charitable interpretation possible, that our economic system requires us to need all that it produces?  Has he not heard of bankruptcy?  Of Schumpeter?  I’d file this under “most idiotic paragraph I’ve read today,” but I’ve been reading some choice materials relating to the Microsoft EU case, so I can’t legitimately make that claim.

Really, this is an example of the worst kind of intellectual elitism and hubris–the belief that cute slogans can capture the complex reality of the market, reduce it to a manageable concept, and then enable perfect ex ante regulation. 

Actually, the dumbest paragraph(s) I read today are the very next ones in the article:

Capitalism is stymied, courting long-term disaster. We still work hard, but only so that we can pay and play. In order to turn reluctant consumers with few unsatisfied core needs into permanent shoppers, producers must dumb down consumers, shape their wants, take over their life worlds, encourage impulse buying, cultivate shopoholism and invent new needs. At the same time, they empower kids as shoppers by legitimizing their unformed tastes and mercurial wants and detaching them from their gatekeeper mothers and fathers and teachers and pastors. The kids include toddlers who recognize brand logos before they can talk and commodity-minded baby Einsteins who learn to shop before they can walk.

Consumerism needs this infantilist ethos because it favors laxity and leisure over discipline and denial, values childish impetuosity and juvenile narcissism over adult order and enlightened self-interest, and prefers consumption-directed play to spontaneous recreation. The ethos feeds a private-market logic (“What I want is what society needs!”) and combats the public logic fashioned by democracy (“What society needs is what I want to want!”).

Just in case you don’t get the real point (Barber doesn’t want it to be too clear, you see, because although he is blaming “the Man,” it’s still borderline-racist and definitely-distasteful):  Poor people are like infants.  He talks about all of us, but he’s not interested in protecting the rich from themselves–his concern is cheap credit, shopping addictions and poor people who “need” iPods.  And it is the poor who are duped by the capitalist merchants of death (or, in this case, leisure.  Same thing, I guess) into an infantile stupor, where they consume beyond their means, deny their civic duties, and generally act like poopyheads (we’re all infants now).

You can bet there is a simple corrective in Barber’s book (which I doubt I will ever get around to reading):  Enlightened and benighted (and massive!) government regulation.  His editorial makes an oblique reference to “democratic institutions,” but he doesn’t go into detail.  Of course Barber has the answer:  Constrain the capitalists.  And don’t worry–he knows ’em when he sees ’em.  And if we just restrict the capitalists to produce only our “core needs,” there won’t be any manufactured wants to cause all these problems.  And poor people can get back to needing food instead of MTV and rich people can get back to . . . not being too rich.  Oh, and cancer will be cured, backyard nuclear fusion will become reality and no one named Bush will ever be president again. 

Why is this garbage taken seriously?

The answer is “yes” according to this MarketWatch article. Here’s a taste.

Forty-three percent of investors with a net worth of $5 million or more, not including a primary residence, say they prefer a guaranteed rate of return for the majority of their investments, according to a new report from Chicago-based Spectrem Group, a consulting firm. That percentage of investors compares with just 29% in 2003 and 38% in 2005 who said the same thing, according to the report “The Move Toward Investment Moderation.”

With April 15 looming, I’ve spent some time this morning figuring out whether to make contributions to my sons’ Coverdell Education Savings Accounts or their 529 plans (I’m no longer a big shot attorney, so I don’t have the funds to do both). The issue has come up because on a recent NPR show someone claimed that 529 plans are more favorable from a financial aid standpoint because the assets are considered those of the parent while the assets in an ESA are considered those of the student. This was news to me. My web research revealed conflicting information and advice on the point. But I think I located the definitive answer in this U.S. Department of Education letter. The letter states as follows:

Coverdell Education Savings Accounts and 529 College Savings Plans receive equal treatment in the calculation of federal financial aid eligibility. Specifically, both can be regarded as assets of the parent if the parent is the owner of the account, rather than the student, and thereby displace a smaller amount of financial aid.

Hence, I’ll be contributing to their ESAs. If you’d like to contribute to their 529 plans, let me know, and I’ll give you my PayPal information.