Systemic Problems, Individual Solutions

I've always been a bit of an asshole. While I try my best to be nice, to get along, sooner or later people realize that I'm actually kind of mean.

One of the biggest issues I deal with is being fairly intolerant of others' ideas.

Specifically, I'm really bad at accepting when other people have a different solution to a problem than I think is best. Because, you know, I like my idea.

So let's talk about that a bit today. Let's dig into systemic problems, and talk about the jagoffs who think individual tactics are the right approach to solving them.

When looking at systemic problems (rising student loan debt, stagnant incomes, growing inequality, discrimination) there seems to be two popular approaches when trying to find solutions.

The first I'll call the individualistic approach. You, you single person living in this unfair world, no one is going to care about your situation as much as you will. That's just the way it is.

That also means you're in the best position to improve your situation. You know the problems intimately. You know their nuances. You know yourself and what works for you, and what doesn't. And besides, help is probably not on the way. If you want this shit to improve, you're going to be the one who has to do it, right?

As an example, let's pretend our society has a problem of widespread stagnant incomes that barely keep up with the rising cost of living. Yes, let's pretend.

To the individualist, the answer is to hustle: work more hours, work smarter, get new skills, get a side hustle, get a new job. Do these things and you have a good chance of increasing your income.

It's straightforward. In many cases, this approach is effective, too. Just read some personal finance blogs for proof and don't worry if they're outliers, because survivorship bias smursmivorship shmias.

In a similar vein, if rising student loan debt now dwarfs that of prior generations, the answer is to work more while in school, save your tips from your summer job, and try to, somehow, graduate with no student loan debt. If you fail at that, maybe because you are bad at working hard, then you can still take the steps outlined above to pay off those debts. You know, hustle.

If there is a retirement crisis where huge swaths of the population have little or nothing saved for retirement, the solutions are, amazingly, again in the hands of the individual. Workers can learn to budget, to create more income, to cut their expenses with frugality, and invest that difference in IRAs, 401ks, HSAs, getting tax advantages all along the way.

In all cases, the problem is yours to solve but, luckily, thankfully, the individual always has the ability to solve all of her problems if she is willing to learn and work hard.

Sure, there are some widespread problems with society. But we can't wait around for those to be fixed (as if they would ever really be solved anyway), so it's kind of on you, kid.

The rub with this tactic is that it lays responsibility for solving systemic problems at the feet of individuals, passing over the harder-but-better approach of addressing the problems in the system that force all these individuals to work harder in the first place.

Systemic problems can also call for systemic solutions.

Let's look at those same problems again, but without chucking responsibility onto the individual.

Instead of asking workers to juggle the gig economy along with their anchor jobs just to increase household incomes, we could acknowledge the fact that wage stagnation is largely the result of policy decisions: that we decided to give greater benefits to capital, at the expense of labor. This tweak to the system is partly responsible for investors getting ahead while workers tread water. As explained by the Economic Policy Institute:

This dismal wage growth is the result of intentional policy choices made on behalf of those with the most income, wealth, and political power. As explained below, these choices fall into five broad categories: the abandonment of full employment as a main objective of economic policymaking, declining union density, various labor market policies and business practices, policies that have allowed CEOs and finance executives to capture ever larger shares of economic growth, and globalization policies. Collectively, these policy decisions have shifted economic power away from low- and middle-wage workers and toward corporate owners and managers.

If stagnant wages are seen as the result of policy decisions rather than, say, workers just not being as motivated as they used to be, we become less likely to embrace a solution like millions of citizens getting second jobs with Uber and Door Dash to get ahead. Instead, we might start considering policy positions like this one from Elizabeth Warren as potential solutions.

If we think rising student debt is not the result of students failing to work more at their ten-buck-an-hour jobs, but the result of the systematic defunding of universities by state legislatures, then certain obvious solutions end up on the table...like increasing funding to prior levels, and clawing back tax cuts that states could clearly not afford.

Let's take another look at the retirement crisis: the sobering reality that one in three Americans have less than $5,000 saved for retirement. This is good ground for personal finance writers, and each of us writing blogs has some hope that we'll help a person or three open an IRA and start socking away money for the future.

But I'm not sure that hoping hundreds of millions of individuals learn enough about personal finance to plan for a comfortable retirement is really the best plan for success.

Should policy makers and corporations be left off the hook entirely? Pensions and Social Security started facing major problems when, whoops, demographic shifts happened. Those dang baby boomers made up a huge portion of the population and then didn't bother having as many kids as their parents did. The boomers up and decided they were going to live longer, too. With fewer workers supporting more-and-older retirees, the math no longer added up. Then those same demographic shifts put private pensions in a bind.

So governments and companies shifted away from the pension model and put the responsibility on individual workers to plan and save for their own retirement. Fair enough: I suppose these entities can't be blamed for demographic realities.

But when there's a huge change to the system, when you're going from a pension model with short retirements to an individual retirement model with long retirements, you can't just skip over the step of educating and training your citizens about the personal finance concepts they're now responsible for executing, dutifully, with each paycheck over the next four decades.

And if governments want to address the underfunding of Social Security, this looming financial crisis facing the one safety net available for retirees, they need to have the courage to address the ridiculous system of a "flat" tax with an income cap: resulting in the highest earners paying a lower effective tax rate into Social Security than the lowest income workers. If we're going to insist on a flat tax, then at least have that tax apply to all the income.

I'm a little sick of hearing the same refrain every time we are faced with financial crises: that we individual citizens are supposed to just figure it out. Dig deep and give more to this charity. Chip in to this kickstarter. Spin up a side hustle. Make more and deeper cuts to the household budget. Find a way to pay down those student loans. Make extra contributions to those IRAs. Find a way to get that money to work for you instead of you working for it.

These are the foundations of good personal finance and I really don't have an axe to grind against people who are just trying to help other people. But can we just step back and realize that people up and changed the game on us? That the systems aren't right and that all this hustling and scrimping and saving from individuals will not make a change to the system itself. That even if you win, that's just a win for you. That everyone else around you and the next generation just has to keep on playing the same messed up game, hoping to beat the odds.

Instead of blindly hoping we can teach everyone to win a rigged game, why not try to tweak the rules?


*Photo is from Uros_N at Flickr Creative Commons.