Breaking The Chains of Debt Servitude and Wage Slavery
Having established the environmental consequences of western affluence here, we must understand the personal financial consequences of this affluence. Our society has a paltry five percent average savings rate, which is to say that most people are basically living pay check to pay check. While 5% is the average savings rate, and some people save much more than this each year, others have a net negative savings rate – they are consistently spending more than they earn through consumer debt. How did this happen, what does this mean for these indebted Americans, and what is the path forward?
When I watch old advertising from the 1950’s like the absurd cigarette commercial below, I can’t help but wonder how this advertising could have possibly been effective.
It’s easy to laugh at 65 year old advertising, but what about this recent Cadillac Escalade commercial that I’ve seen around?
The contemporary advertising is much more sophisticated. It’s directed right at the ego, and it says, “Don’t you want to be powerful and important? Don’t you want to live like a king? This vehicle will make you all of those things.” This is just one example, but we can identify lots of psychological manipulations in most advertising for most consumer products that appeal to our egos, sexuality, or fears.
Of course, half of the people to whom these ads are directed can not or will not pay the full asking price at the time of sale, so we have a sophisticated system of auto financing, credit cards, and cell phone plans that mask the true costs of these products. This is how the US has a national credit card debt of nearly $800 billion. We sheepishly follow the commands of advertising to consume more and more, much to the benefit of corporate profits and economic output as cell phones are imported, Escalades are manufactured, oil is pumped, and credit card balances compound at 20% APR.
The Personal Economic Cost of Consumer Debt
At it’s worst, this kind of consumer debt can lead to a spiraling out of control debt load that cannot ever be paid off; not to mention bankruptcy, divorce, housing foreclosure, and even suicide. That’s not hyperbole, and I’m not just stealing this from the movie “The Joneses.”
One hidden cost is that these consumption enthusiasts are losing out on the potential to benefit from the good side of compounding interest – investing their surplus money in mutual funds, stock, CD’s, or bonds to see their wealth grow along with the economy. Instead, one could say that our 70% consumer economy is built on the backs of willing consumers racking up debt.
Worse still is the necessity of working a dissatisfying job, perhaps long hours, to consume more and also just to service the debt of the credit card, mortgage, and car payment. Such a situation takes away choices – you can’t leave a job with an abusive boss, you can’t turn down overtime, and you live in constant fear of losing your job. This condition is called wage slavery because one must work on command with little self-direction, and any money earned just goes towards paying one’s debt. While some of today’s wage slaves are very well dressed and have nice cars, houses, and phones; they have little choice but to work on command.
A Path Out of Debt Servitude and Wage Slavery
This situation is not pretty, and no one should ever get themselves into this situation if at all possible. If you are in this situation, you have to feel empowered to get out. First, recognize that you cannot nickel-and-dime your way out of such a situation; such a transformation requires a change in your entire way of seeing the world and your purchasing decisions. At a basic level, you must find ways to minimize all expenses and apply all savings to paying off your debt principle. If you are not in debt but want to find a way out of wage slavery, you must apply all of your cost-reduction savings to investing in diversified mutual funds or some other profitable, diversified investments.
In upcoming posts, I’ll discuss ideas for cutting major expenses: housing, transportation, food, and communications.
The ideas expressed here are generally directed at middle-class Americans making more than $35,000 to $40,000 per year. I understand that there are many people in the United States who are struggling to get by and who aren’t engaging in the type of conspicuous consumption described above. Also, I am not a financial advisor or accountant, and the information above is general public commentary. I cannot advise you on your specific financial situation.