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The Cash Economy’s Liquidation of Social Stability

In some ways, the central problem of America has become liquidity: wealth, energy, and the self all have lost their solidity. The flow of money has had a profoundly corrosive effect on our financial institutions and also our social ones. But there’s no going back to a golden age. Only by reinvigorating our modes of association can we successfully address the pathologies brought on by the quest for financial (not economic) independence.

Reimagining Wealth Banner

Editors’ Note: Jeff Polet’s essay is the second in our series, Reimagining Wealth. This series critically examines modern notions about wealth, the cross-generational practices surrounding wealth and property, and the interplay between wealth and family formation. Dr. Polet’s essay examines how our financialized economy has contributed to social fluidity, uprooted younger generations from family and home towns, and left them to search for meaning in economic performance . Yesterday, we published Mark Mitchell’s Long Read essay about rebuilding a tradition of intergenerational wealth. Later this week, we will have essays from Clara Piano, Patrick T. Brown, and Elayne Allen.

On Monday, December 12 at 12:00pm ET, we will have a webinar discussion via Zoom with all the authors. Register here.

In the essential chapter on the “Social Condition of the Anglo-Americans,” Alexis de Tocqueville identified a central mechanism that marked the movement from the stable bedrock of an aristocratic age to the “fine and shifting sands” of a democratic one: the repeal of the law of descent in favor of a law of equal partition. This change in handling inheritances not only dispersed wealth, it unleashed the dynamism that Tocqueville identified as a distinctive, if not destructive, feature of democracy. It created great economic equality, he argued, but did so at the price of altering the nature of wealth itself, so that it was now located in money rather than land. Furthermore, it also changed the nature of the family, whose attenuated economic function resulted in a collapse of parental authority. The abeyance of entailment led Tocqueville to observe that “I know of no country, indeed, where the love of money has taken stronger hold on the affections of men.”

Americans, not having familial wealth to draw upon, thus relentlessly engage in earning money. But money only has extrinsic value. So when we say we are “making money” we are really speaking only metaphorically, because we are not, properly speaking, making anything. Land, meanwhile, is stable and productive wealth; it is something that is intrinsically valuable because it is capable of producing necessary goods. Money takes genuine wealth and liquidates it, and in the process renders the social world fluid.

Liquidating America

In some ways, the central problem of America has become liquidity: wealth, energy, and the self all have lost their solidity. The flow of money has had a profoundly corrosive effect on our financial institutions and also our social ones. The financial rather than the productive sector now occupies the lion’s share of economic activity. Our dependence on liquid energy has created enormous political, environmental, strategic, and social hazards. Even the self is seen as fluid, a constantly moving stream of unstable identity.

Everything is fluid. Capital flows to urban centers that engage in financial speculation and away from places where people used to make and grow things. Young adults follow the flow of capital, and our colleges largely operate as sorting mechanisms that send children away from the places of their birth to follow the money. Politically, our constitution no longer operates on the principle of limited government, but as a fluid adaptation to changing mores. Critics complain when the system of checks and balances actually works.

The cash nexus, as Robert Nisbet argued, dissolves social institutions as well as personal identity. Where cash flows, “looseness” becomes inevitable. We become people who, in Nisbet’s words, “hang loose” upon the world. Uprooted and disconnected, we become competitive rather than cooperative. Tocqueville predicted economic and professional competition would increase as institutions weakened because the marketplace was an arena for proving your worth. Reduced to the mass of equal, alike, and atomized beings, we come to regard ourselves as replaceable and inconsequential. This realization results in anxiety and anomie, the self burdened with creating meaning it can never fully justify. The temptation to immerse the self in mass projects occurs simultaneously with its retreat into itself, making us “more than kings and less than men.” The public realm becomes a competition for status and material well-being, and the home becomes a refuge for restless souls that can never achieve enough; but bereft of its economic function, even the home loses its ability to articulate norms and shape our sense of meaning and purpose and belonging. Instead, our net worth becomes our self-worth.

 

Young people, as a result, are left to “make their way in the world,” and that way is typically away from home. Adulthood means independence, the emancipation of the young person from the strictures and structures of nurturing home and community. We underestimate how frightening this prospect is, not only because a young person is deprived of essential psychic supports, but also because our value now hinges on the perceptions of others who didn’t grow up with us. In that sense, the cash nexus creates an impulse to see the self as its own brand, and branding and marketing the self become two of its central features.

The instability of a democratic society coupled with the destructive features of industrial capitalism necessarily results in significant changes in the way we make life decisions. Because money is an inherently unstable store of value even while it monopolizes the medium of exchange, it becomes virtually impossible to plan for the future. Additionally, because money is fungible and allows for the exchange of labor for goods, it encourages consumerism. Tocqueville thought democratic man was made mad by the taste for material gratification: when “the distinctions of ranks are obliterated and privileges are destroyed, when hereditary property is subdivided and education and freedom are widely diffused, the desire of acquiring the comforts of the world haunts the imagination of the poor, and the dread of losing them that of the rich.”

Economies of Cash

Landed wealth encourages the virtues of frugality, of careful and patient cultivation, of avoiding excess and luxury, of physical labor, of learning how to plan ahead. But in a highly dynamic cash-based economy, those virtues wither away, and are replaced by conspicuous consumption and immediate gratification. A result will be that young people are incentivized to find the highest-paying jobs they can in our nation’s playgrounds, otherwise known as the gentrified areas of our cities.

Simple observation validates the claim. Center City in Philadelphia, for example, with its craft cocktail bars and trendy restaurants, is populated by twenty-somethings in the ed/med field who spend copious amounts of disposable income on $15 cocktails and $25 breakfasts. The rents being as high as they are, they have little ability to save, but why save anyway? I’m not saying that any of them foresaw 8 percent inflation, but there is no greater disincentive to saving than a high inflation rate.

Additionally, the financial burdens of a cash economy do not fall equally among the classes. The upper classes’ familial reserves (and the fact that they tend to have more intact families) mean that the scions have greater economic opportunity and can take greater economic risks. An additional safety net is provided by the social networks and educational opportunities available throughout these communities. Since young people tend not to receive inheritances, they can at least avoid debt, or be given the head start that creates more options in life. (I’ve not seen data on “adulting” relative to socio-economic status, but I’d be interested in it.)

The lower classes are always going to live on a more hand-to-mouth basis. About a third of American households have insufficient cash reserves, so any emergency situation could be catastrophic. The social and financial capital that makes education, property ownership, and mobility possible is largely absent in these communities. Since debt becomes a tempting vehicle for pursuing the American dream, those in the lower classes are particularly susceptible to predatory financial practices.

 

Generational Risk-Aversion

The problem of what San Diego State University Psychologist Jean Twenge has called “growing slowly” is multidimensional, but in these essays we are particularly interested in how the desire for financial stability is affecting major life decisions such as home ownership, marriage, and having children. One factor Twenge has identified is that the younger generations are much more risk averse than are older ones. She has identified some of the causes of this: hyper-vigilant parenting, the advent of the smartphone and social media, the Great Recession, and others. What her data show is that young people are not risk-takers: they are delaying getting their driver’s licenses (what used to be the great ritualized marker of emancipation from the parental home), delaying having sex, delaying drinking, delaying drug use, and so forth. They are obsessed with safety, and thus determined to mitigate vulnerability.

Debt certainly makes us vulnerable, and so do relationships. Anyone seeking to minimize vulnerability will avoid those two things, especially the debt we take on with a home mortgage or with a college education. There’s no way, however, to get young people to take on adult functions without making them more resilient and more willing to take risks. Biden’s debt forgiveness plan, whatever its merits, not only doesn’t address that problem, it could arguably make it worse.

There is certainly a lot of handwringing about the younger generations, and one would have to be both blind and insensitive not to have some sympathy for the financial pressures they face. I’ve argued here, however, that those pressures are a feature and not a bug of an economic system that has increasingly moved away from productive activity to speculative finance, and a social system that encourages isolation. We have left them bereft of the tangible resources that we know lead to a flourishing life: commitment to place and neighborhood, mutually supportive and stable families, active engagement in a church community, and participation in grassroots political activities.

The current combination of social isolation and economic pressure intensifies the signals we send our children to move away from the four mediating structures identified above. We constantly emphasize that higher education and the acquisition of material goods are the keys to a good life; but these are the two things that weaken social institutions. It’s small wonder that young people don’t want to participate in the formation of social capital: they’re too busy chasing money.

 

Back to Basics

There’s no going back to a golden age. Only by reinvigorating our modes of association can we successfully address the pathologies brought on by the quest for financial (not economic) independence. Fortunately, there are models available to us. The first requires that we rethink education (as currently practiced with its opportunity costs, its debt burdens, and the promise of high-paying jobs that only a few of the attendees will actually secure), and the second that we embrace a more austere way of living.

One example of how to do this addresses what few Americans realize is a giant hole in our economy: there are very few tradesmen under the age of seventy. I’ve talked with a lot of plumbers, electricians, finish carpenters, and drywallers, and they’ve all told me that not only can they not find help, they can’t find anyone they can share their knowledge with. As a result, a lot of these necessary skills will soon no longer be available, and since pipes will continue to leak and circuits to blow, a lot of American homeowners are either going to learn how to fix things themselves or they’re going to have serious problems on their hands. Likewise, the remnants of American manufacturing still need skilled laborers such as tool-makers and mill operators.

The Harmel Academy in Grand Rapids takes young adult men, puts them in a residential community where they say the Hours and take Daily Mass, and teaches them trades. It’s an ideal blending of the liberal and the servile arts, and the demand for the graduates is so great that employers will pay the tuition and offer a generous starting salary in hopes of attracting the graduates as employees. Machine operators will often start at $45 an hour and plumbers and electricians can soon be making well into six figures.

The Piney Woods School in Mississippi is not a trade school, but it is a self-sustaining enterprise that not only prepares young people for college, it also teaches them genuinely useful skills, such as farming and husbandry as well as repair and maintenance. Students are getting out from behind their screens and getting their hands dirty and their knuckles bloody, being reminded of their embodied condition. This getting out into the world has had the predictable effect of making depression and anxiety almost nonexistent. Getting out of your head and enjoying conversations while engaged in labor and actually producing something is good for both mind and soul.

You can’t build an economy on intellectual labor and ledger books. An economy results from building, growing, making, and fixing things, and when we engage young people in those activities we build, grow, make, and fix them in the process. When a sports team begins to underperform the coaches will stress the need to go back to fundamentals. The same goes for our economy: it’s time to get back to fundamentals, and that means putting away our phones and other trinkets and getting our feet into the mud and developing some productive property.

Young people need to feel the resistance of the physical world, because resistance is what makes us strong and resilient. They need to see crops fail, to slaughter the sheep they helped raise, to see a project destroyed by the elements only to have to rebuild, to see the labor of their hands result in something in which they can take pride. Engaged in these projects they will create genuine wealth and a deep sense of mutual dependence and shared effort that in some instances will blossom into love and marriage. A return to the land and developing trade labor can go a long way toward solving the problems we face when young people grow slowly.

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