Markets can't solve everything

Money Stuff

Market values govern much of our lives. We’ll call this mode of thinking Market Life. Market Life affects the way we think, and the decisions we make. In many ways, this makes sense - we live in a world organised around the existence of markets.

Consider savings. Simplified economic theory goes that saving is good for the economy, because a bank can use your deposits to create new credit to lend out to businesses, who will then invest in productive purposes which add value to GDP (economic growth). But too much saving is bad because then no one is spending money at all the businesses.

Savings are also good for you personally, because of the benefits of having a buffer in case of financial distress. But too much saving is bad because inflation always delivers you a negative return on your cash. As Billionaire hedge fund manager Ray Dalio says, “cash is trash.”

One generally accepted principle is to have enough savings to cover a few months of expenses. But most people don’t. Almost one third of Australians don’t have enough savings to cover a month’s worth of expenses, according to comparison website Finder’s research. This problem particularly affects young people - who are often in insecure (read: casualised) work, earn lower wages and have to pay the same rents as everyone else for an average residence.

To solve this ‘problem’ - IE. a lack of young people with savings - a whole host of startups work to ‘incentivise’ personal savings through gamification and sweepstakes. Making the ‘boring’ world of personal finance attractive to the youth and all that. The aim here is to encourage healthy financial habits.

Inherent in the whole idea of solving the problem of youth savings through the market, and gamification and incentives, is this assumption that financial wellness (or lack thereof) is always a personal problem. If you don’t have savings, it’s because you aren't disciplined enough, you’re not savvy enough, you’re not hustling hard enough - but if we turn it all into a game, we can trick your brain into saving.

It’s a rather libertarian ideal. Discipline and education certainly helps us achieve financial goals. These are useful tools for life and should be promoted. But this logic doesn’t apply across the board - it assumes we all start from similar positions in society.

In our market world, young Australians are inheriting a society where real wages have increased by less than 30% since 2000, while real house prices have risen by more than 5x that amount, an 150% increase.

Sure, it’s exciting to save $25 and potentially win $250K in a sweepstakes. There can be very real benefits to these market-based solutions for the individuals who make use of them. But in the process, we can’t ignore the systems and structures that create these problems in the first place. And that’s exactly what market thinking does - it displaces other modes of thinking. It centres market problems and market solutions.

In Market Life, we have to actively choose which non-market values are worth caring about. And fight to keep them. Whether that’s hobbies for their own sake, civic participation, or building a just and equitable world.