Consumerism—not Capitalism—is the culprit for American Poverty

Photo by Pepi Stojanovski

As of 2019, more than 10.5% of Americans are at or below the poverty rate—that’s more than 32 million Americans, according to the U.S. Census Bureau statistics.

However, this statistic does not tell the full story of poverty in America. Here is one that does: 40% of Americans cannot afford to pay an unforeseen expense of $400. The poverty rate ignores  the other 29.5% of the population that could not afford a trip to the emergency room, to remedy an automobile issue, or even to buy two pairs of Jordan sneakers without having to incur debt or borrow money from a relative. By this measure, it is evident that poverty is far more pervasive than most Americans would admit—affecting almost 125 million people.

Before the pandemic, the United States easily boasted the most vibrant and robust economy in the world. Wages, GDP, and the stock market were rising—and unemployment was at a fifty year low. Although the economic effects of COVID-19 eliminated these gains, the prevalence of poverty among almost half of American citizens far outdates the coronavirus. Despite this, the U.S. still remains the richest and most resourced country, which begs the question: why does impoverishment run rampant in such a prosperous nation?

The Myths of Underpaid and Overworked

Many claim that capitalism is to blame. There are an abundance of variations to this argument, and they all utilize the same logic: American capitalism exploits the average laborer and underpays them for their work. This, in turn, reinforces the economic hierarchy, making the rich richer and the poor poorer. Other frequently cited factors include race, gender, and different lived experiences. While there is truth to some of the claims, they ignore key factors. Most glaringly of these is that most impoverished Americans are not underpaid. 

The vast majority of the 40% of Americans who cannot afford an unforeseen expense of $400 are part of the lower half of all income earners in the United States. At least 23% of that 40% earn between $25,000 and $75,000 annually. The living wage for Kentuckians, according to MIT’s living wage calculator, is about $22,000.  These statistics clearly display that most people in the United States are not underpaid. But, for some reason, they still cannot afford to pay an unexpected charge of a few hundred dollars. Why is this? Someone who makes seventy-, sixty-, fifty-, forty-, or even thirty-thousand dollars should be able to cover this cost with ease, right? Not in America. There is only one explanation for this: mimetic consumerism, fueled by financial illiteracy.

Consumerism as the Culprit

Consumerism is defined as the socio-economic encouragement to acquire goods and services in ever-increasing amounts. The United States is a consumerist society; the country is expected to spend a total of $242 billion dollars on advertisements in 2021 alone. This number has increased every year for the past decade, excluding 2020. Consumerism alone does not negatively affect financial prosperity, but America has developed an evolved form of consumerism based not only in materialistic desire, but also in mimetic desire. 

Scientific American magazine explains mimetic desire like this, “Kid A is playing with a toy, and the next thing you know, Kid B wants it, too. Even when there are other toys around, Kid B is no longer satisfied. He wants what Kid A has got.” In financial terms, this is known as “Keeping up with the Joneses.” American citizens are in a race to display wealth they do not possess with overpriced homes, $50,000 cars, fancy clothes, and the newest smartphones, among other materialistic items.

This desire is so strong that Americans frequently incur heaps of bad debt, or high interest debt and debt on products that depreciate in value, to achieve the incomplete and often misleading appearance of wealth. Why is this debt so damaging? It limits options. 

Proverbs 22:7 states the “debtor is slave to the lender.” One must not believe in scripture to know this proverb is true. If a person lacks the freedom to spend or invest their money as they see fit, because they must pay an interest payment to the mortgage lender, to the car dealership, to the credit card company, and to Sallie Mae, they are a financial slave. This is not hyperbole; a person’s financial liberty is severely restricted when they have debt. They cannot use money as a tool to increase their own wealth, as is necessary in a capitalist economic system, because it is already making the rich richer.

Financially perilous lifestyles like this are so ubiquitous in American society that debt is normalized through the culture. The country is in aggregate student loan debt of 1.7 trillion dollars; auto debt of 1.2 trillion dollars; and credit card debt of $980 billion dollars. This problem is so widespread and pervasive that it has become normal. But in the words of financial expert Dave Ramsey, “Normal sucks! Normal just means you’re broke.” When one realizes how prevalent debt is, it becomes clear to see why poverty dominates in a nation so wealthy. 

How do we get out of debt?

This all paints a bleak picture of how America’s financial future looks, but the situation is not hopeless. The solution to this economic crisis is already known: the country must become financially literate. Accomplishing this means investing in financial literacy education in K-12 and in universities. Some states, like Kentucky in fall 2020, have made a personal finance credit a requirement for high school graduation. In certain schools, such as Frederick Douglass High School in Lexington, financial literacy courses have been offered long before they were required. While content in these courses may be helpful, many programs are suited for those with a higher level of understanding, making it more difficult for those who need to develop basic financial literacy first. In the future, tailoring the content to a high schooler’s financial literacy level will be critical to its success.  

There are simple ways individuals can improve their finances, and college-age is the most opportune time to implement them. This is when debt and expenses are usually at their lowest and the ability to modify financial behavior is highest. Some experts claim that student loan debt is a “good debt,” it is not. Student loan debt is so insidious because it forces graduates to begin their professional lives with tens of thousands of dollars of debt. It is easy to rationalize this debt on earning enough income to pay it off later, but on average, it takes 21 years to pay off a student loan. In addition, 74% of people with student loan debt regret incurring it. There are alternatives to signing student loans, including working while attending college to pay for school, minimizing the cost of school by attending a community college, and applying for as many scholarships one can find. If these are not possible, then it is time to question whether attending college is worth it. 

To succeed financially, Americans must consistently avoid bad debt at all costs. If they have already acquired debt, their primary focus should be paying it off as quickly as possible, and never incurring bad debt again. One effective method of paying off debt is the snowball method. They must have written budgets that guide them when spending money. They must keep savings to help them handle emergencies; and they must invest in their retirement early, consistently, and safely after graduation from high school or college. People who do this will not be normal, but their odds of financial security and stability will skyrocket. 

Capitalism Doesn’t Need Fixing

Capitalism will not ever result in wealth equality as it was not designed to. Capitalism was designed to award effort and entrepreneurial risk, and in America, that is exactly how it functions. This is made evident by the incomes of its people. The majority of Americans earn incomes higher than the national average living wage, they simply do not possess the knowledge that would fully empower those incomes. 

Proponents of socialism and communism ignore this reality: that the government could throw as much money as it desires, whether in the form of cash or social programs, at lower income communities, but this investment would result in minimal wealth building without any dissemination of financial literacy. Like most lottery winners, the money and benefits will flow in and directly back out. Financial ignorance most frequently results in financial struggle, even when a person receives a major windfall. 

The importance of money is the power behind the faces of those dead presidents—the power to enjoy the pleasures life has to offer. The power to give to those who are less fortunate. Most importantly, the power to transform the economic state of future generations of families. The power to give children the freedom that could not be afforded in the past: to buy them a car when they turn sixteen, send them to college debt-free, and leave them with an inheritance. 

Changing the Future by Changing Our Focus

To accomplish this, the mimetic desire of Americans must be transformed. Mimetic desire is not based on a jealous sentiment to acquire what others own, it is based on what one values—and that value can be easily transmitted from one person to another. Therefore, the country must decide which they value more: a temporal flaunt of empty wealth (because that is considered normal), or a more permanent wealth that spans generations and holds the power to bridge the expansive wealth gap. This will dictate whether poverty continues to thrive in America, not any proposed “reform” of capitalism. 

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