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How Culture Influences Finance

“We become what we behold. We shape our tools and then our tools shape us” — John Culkin

Financial structures tend to feel hereditary and enduring, but in reality, they’re very susceptible to cultural forces. Culture shapes everything from the video games we play, to the social norms we enforce, even the conversations we share on Twitter. Money is a necessary evil in all of our lives and it can be wielded as a weapon, or serve as a powerful communication tool. Money signals our collective cultural values and beliefs, and they’re reflected in our financial structures. But it wasn’t always that way.

A seismic shift in American culture occurred when society moved from a commercial mentality towards capitalism’s hyper-commodification and monetization of every facet of our lives. By placing Americans secondary to economic growth, the lens in which we view our communities, ourselves and our collective betterment has been altered. The change happened gradually, redefining our culture, priorities, and values along with it. We’re even watching the tentacles of this legacy play out today, as our economy is reopening before a deadly virus has been sufficiently controlled. In America, our financial structures are being protected with more vigor than American lives.

Culture’s impact on American financial regulations and protections

Financial regulations are a corroboration of who’s being protected and supported in our society, and who’s…well, not. Consider this: from 1944 to 1945 in America, the top federal income tax rate was 94% and applied only to income north of $200,000 (adjusted for inflation, that’s $2.4M in 2009 dollars). The tax was implemented, was a resounding success and remained until the 1960s. Compare this to last year, when the mere suggestion of a similar 70% top tax rate was met with caterwauling by legislators who foamed at the mouth arguing that this idea was a personal infringement on all Americans, as opposed to a shared investment in our society. Considering the median income in the US is $31,000, who do these regulations truly prioritize?

The biggest complaint from American voters is a concern that the wealthy are not paying their fair share. The bottom 50% of American households pay roughly 25% of their total income in taxes, while the wealthy are increasingly paying $0. This regulatory discrepancy is an accurate cultural reflection of who is set up to benefit from the American financial structures.

Culture has played a starring role in American financial regulations throughout history. In order to contend with the Great Depression and the ensuing economic fallout, Roosevelt passed Glass-Steagall to restore financial stability, along with many socialist type policies such as the Agricultural Adjustment Act and the Home Owners’ Loan Act. The culture, back when these regulations were first enacted in the 1930s, can be juxtaposed against the culture of 1999 when Glass-Steagall was repealed because banks felt constricted.

Finally, let’s examine the private equity segment of the financial industry. It operates under embarrassingly few financial regulations and even somehow managed to avoid mandatory SEC registration until recently. Principally, private equity firms are to a larger degree, entitled to behave like payday loans for struggling corporations. Another faithful reflection that illustrates who our financial regulations are designed to protect.

Financial literacy and our everyday financial habits

Our financial behavior and attitudes are unwittingly filtered through our cultural lens. Research indicates that financial literacy is most influenced by financial socialization and plays a strong role in people’s self-control with regards to money. Considering 74% of 13–21 year olds aren’t taught about financial literacy, generational money patterns are inherited.

Overarching financial structures and educational programs ignore the necessity of arming young people with the tools they need to make practical financial decisions for themselves. In our current culture that commodifies and monetizes our very existence, it’s particularly telling that the basic foundational knowledge required by many to succeed financially is ignored.

Generally, people and organizations spend money and resources on what they value. Glancing at the balance sheet can offer a straightforward way to identify a company’s priorities because it shows where they spend their money. Does the bulk go towards executive stock options, or research & development? There’s your answer.

The lack of financial literacy in schools exposes a larger cultural pattern of indifference. But this indifference is mixed with our FOMO, peer groups, desire for social prestige, conspicuous consumption and lack of self-control to create the toxic brew of financial socialization we’ve been submerged in. These messages create the ongoing cultural context of dealing with money that’s passed down between generations.

Cash rules everything around me

Money is inescapable. It permeates every facet of our lives. American culture worships at its altar, a trend that’s accelerated since capitalism took hold. As this societal shift towards monetizing every aspect of humanity occurred, there emerges a logical argument for what we’re witnessing right now in this country. In a system that only recognizes and values productivity and dollars, it makes sense from a financial perspective, that the response speaks their language. Money is a medium of communication, after all.

Let’s see what the next century has in store, hopefully it’s more 99%-centric than things are now.

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