Rates of personal debt and corporate debt are in decline. Rates of personal savings and corporate savings are up. Banks are "sitting on" (whatever that means--odd phrase) over one trillion dollars of excess reserves; corporations 3 trillion.
The decline in indebtedness is generally seen as a good thing--a reassertion of the old American value of thrift, a marker of the end of "consumer culture." I understand this. And I am pleased that banks are re-capitalizing. But I wonder what it means in the context of this fact: in this difficult economic time, rates of personal giving are down, (see also here and here) even while need is up.
Of course the simplest explanation is that people's budgets are tighter, and so they can give less. Or its variant, that with unemployment at 9.6% there are simply fewer people who can share their wealth. I am willing to accede to this argument. But only up to a point.
Because one thing underlies both debt and giving--the belief that making a promise to another entity about our future behavior is a good thing. Taking out a loan is, at its most basic level, a wager that things will be better in the future. You make that assumption by connecting with an entity--a bank perhaps, but as often a family member or friend--which is willing to invest in you on the assumption that things will get better too. (After all, no one loans money on the assumption that it will not be repaid.)
Generosity carries the same assumption--that in giving, both the recipient and the giver will be better off. The improvement takes place in three places: in the life of the recipient, in the life of the giver, and in the relationship between the two of them.
So when lending and giving are down, there are impacts beyond the economic ones. And key among those impacts is the effect on civic life. When there are fewer connections to other people, civic life becomes coarser, less intertwined, more selfish. We certainly see this in politics; if the decline in giving and lending is being occasioned by a decline in the willingness to wager with others on a better future, we will soon see it in our communities as well.
The Cost Trap, Concluding Thoughts
1 day ago