Monday, November 7, 2016

Pandering to Those with Too Much Debt

Professor of economics at Carleton University, Frances Wooley, says that “Financial literacy education is mostly ineffectual debt-shaming.” Her article makes a number of excellent points, but contains a dose of pandering as well.

Most of what passes for financial literacy education doesn’t help people get out of debt. True enough. The forces that drive us to spend money are complex, just as the forces that drive us to gain weight are complex. Just telling a person to spend less rarely helps.

Most people with too much debt already know their spending is a problem, so telling them again has minimal effect. There are possible exceptions with naive young people who haven’t yet maxed out their first credit cards, but just telling them to stop spending so much isn’t likely to help much either.

Businesses do what they can to exploit our weaknesses and make it very easy to spend money with the tap of a credit card. Governments can certainly do more to help simplify people’s financial lives and help them avoid mistakes.

Wooley says “It’s time to stop ‘debt-shaming’ those who, faced with inadequate incomes and rising costs, are not able to stick to a budget.” When this is directed at government, it’s a valid criticism. When the public reads this, it becomes pandering. If you’re in debt and would like it to be someone else’s fault, here you go. This might help you feel better about yourself, but it won’t stop the debt collectors.

You can blame businesses for exploiting you, and blame governments for not fixing your problems, but doing so won’t improve your life. If nobody else will help you, your only choice is to try to help yourself. This is about pragmatism, not blame. Ideally, we should all be working toward societal change that will help people at the same time as each doing what we can to help ourselves.


  1. I agree that sometimes bashing people over the head with a hammer may not be the best way to get the point across, however, at times there does seem to be some folks who "just don't get it", or as you point out those that enjoy making it somebody else's fault (or as we say in Quebec, "C’est La Faute Du Federal!")

    1. @Big Cajun Man: Even when a problem is somebody else's fault, if that somebody else won't fix it, you have no choice but to try to fix it yourself.

  2. The following exchange is reproduced to remove broken links.

    ----- BHCh November 7, 2016 at 12:24 PM

    Personal Debt can be good or bad. A lot of the time it plays a useful role of intergenerational transfer of money. Effectively young families without money but with a growing income borrow from old people with lots of cash but no income. Both sides win. Helps the economy too.

    And some people will screw up, they should be allowed to. That's what personal responsibility is all about.

    Governments should try not to do any harm, like they are doing now by keeping the rates too low.

    ----- Michael James November 7, 2016 at 1:44 PM

    @BHCh: I think it's safe to say that credit card debt is almost universally bad. As for personal responsibility, I think there are important limits to how much we should lean on this idea. At one extreme, we can't expect the government to protect us from all harms. At the other extreme, we need limits on the things that businesses can do to deceive us or exploit our weaknesses. We can differ on what those limits should be, but it's unreasonable to say there should be no limits at all. People need to be allowed to screw up, but only to some degree.

    ----- Garth November 7, 2016 at 5:39 PM

    I think the key to becoming financially savvy is to look yourself in the mirror and ask, "how bad do you really want this?". Only when the answer is, "really, really bad" can good things happen. It requires absolute personal commitment to making changes. From that point on, you will find the necessary path to financial independence. Simple but never easy.

    Help in the form of good information and advice is readily available once you learn to separate the wheat from the chaff.

    ----- Michael James November 7, 2016 at 6:45 PM

    @Garth: If I'm honest with myself, I have to admit that separating the wheat from the chaff was a long, slow process for me.