The Good Society

Looking forward to meeting Dr. Shiller this week and hearing him speak on the Skills Gap Economy. The release of his new book, Finance and the Good Society, speaks to the financial community, and business in general, to take responsiblity for the re-thinking of the current economic situation with positive action with long-lasting global impact.

A summary below from the Princeton Press:

The reputation of the financial industry could hardly be worse than it is today in the painful aftermath of the 2008 financial crisis. New York Times best-selling economist Robert Shiller is no apologist for the sins of finance—he is probably the only person to have predicted both the stock market bubble of 2000 and the real estate bubble that led up to the subprime mortgage meltdown. But in this important and timely book, Shiller argues that, rather than condemning finance, we need to reclaim it for the common good. He makes a powerful case for recognizing that finance, far from being a parasite on society, is one of the most powerful tools we have for solving our common problems and increasing the general well-being. We need more financial innovation—not less—and finance should play a larger role in helping society achieve its goals.

Challenging the public and its leaders to rethink finance and its role in society, Shiller argues that finance should be defined not merely as the manipulation of money or the management of risk but as the stewardship of society’s assets. He explains how people in financial careers—from CEO, investment manager, and banker to insurer, lawyer, and regulator—can and do manage, protect, and increase these assets. He describes how finance has historically contributed to the good of society through inventions such as insurance, mortgages, savings accounts, and pensions, and argues that we need to envision new ways to rechannel financial creativity to benefit society as a whole.

Ultimately, Shiller shows how society can once again harness the power of finance for the greater good.

Robert J. Shiller is the author of Irrational Exuberance and The Subprime Solution, and the coauthor, with George A. Akerlof, of Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism (all Princeton). He is the Arthur M. Okun Professor of Economics at Yale University.

The Council for Economic Education (CEE), in collaboration with the Calvin K. Kazanjian Economics Foundation, released its seventh Survey of the States: Economic and Personal Finance Education in Our Nation’s Schools. The bi-annual report brings attention to the critical importance of economics and personal finance education by documenting its status in the fifty states and the District of Columbia.

The recent economic downturn has brought nationwide attention to the dangers of a financially illiterate society. The new survey shows that while there has clearly been progress since the first survey in 1998, that over the last two years, the trend is slowing and in some cases moving backward.

This report gives great insights and benchmarks for goal-setting for moving ahead as a nation committed to finanical education.

Girl Scout’s New Cirricullum Includes Financial Literacy Badges

A modernized new program for the Girl Scouts includes 13 badges earned for becoming financially literate. From budgeting to saving to understanding debt and credit, girls are able to access information typically not found in school, yet so critical.

Certainly, the need for this education is not limited to girls. It’s not even limited to the youth. It was the very lack of financial education that led to poor decision making, which was part of the series of events resulting in our current economic environment.

While we await the government providing more formalized requirements in our school system, it’s great to see the Girl Scouts taking the lead.

Time for a Federal Mandate to Teach K-12 Financial Education

Dan Kadlec of Time magazine is good to call out Education Secretary Arne Duncan in his article last week, “Hey Secretary Duncan, It’s Time to Teach Kids about Financial Education (Not Just Talk About It).” Secretary Duncan gave a good speech last week to the President’s Advisory Council on Financial Education, created by Obama in January 2010. The Secretary used strong language promoting the need for financial education, but fell short by not calling for a federal mandate. It’s time that he make good on his words to promote greater teaching of financial literacy in K-12 education. 

As Kadlec points out, the work of developing the curriculum today is being provided by not-for-profits, like the Council for Economic Education (CEE). These programs are largely funded by business as part of their corporate responsibility commitments. 

Below is an excerpt of Secretary Duncan’s comments:

“As important as reading and math and social studies and science are, I think today more than ever financial literacy has to be part of that. To continue to have a population that is relatively illiterate in these matters, I think has real negative consequences to our democracy. … This is not a place where we just need to get a little better. We’ve got to get a lot better, and we’ve got to get better faster. … You have to start young. … There are some problems where I think we’re pretty close to solving them, we just need to tinker, and this is not one of those. We have to get so much better. … We have a state of crisis here. We have an emergency, and I feel this tremendous sense of urgency.”

Kadlec points out, “The committee’s recommendations will likely include an appeal for educators to engage with the stakeholders from the financial services industry to help devise finance planning curricula that address the core elements of personal finance.”

As the advisory committee works toward its final recommendations to the President and the Treasury and Education departments, it is important to recognize that the foundation for making this K-12 financial education broadly available is already well underway through the CEE and other organizations.

American’s have never had to assume so much personal responsibility for their own financial well-being as today — with businesses eliminating defined-benefit programs, social security a relic and the stock market uncertain. The need for action for the younger generation has never been greater. It’s a great gift that we can give them.

(Disclosure: As part of my deep interest to support economic empowerment, I serve on the board of the Council for Economic Education.)

Occupy Wall Street: An Opportunity for Corporate Leadership

By: Deidre H. Campbell

Wall Street protestors cannot be dismissed as a mob in the streets. It’s a massive, growing demonstration of frustration. And, unfortunately, a lot of people in this country have good reason to be angry. They didn’t cause the economic crisis. But it’s sure impacting their ability to get jobs.

While Occupy Wall Street takes to the streets in 250 cities around the world, the financial services industry and Washington seemingly take no action. Even more frustrating is that the dialogue on Occupy Wall Street undermines its efforts as lacking messages and focus without making the larger connection.

The point is that it’s happening at all.

The energy of Occupy Wall Street is being wasted on inarticulate outrage, because it’s leaderless. The protesters, along with many in the general public, are crying out for someone to help them understand why the debt-ceiling problem remains unsolved, when the job market will recover, and where symbols of hope can be found.

We do have some great leaders in financial services that could credibly take action, grab the leadership mantle and provide solutions. Treat the entire situation like a sustained crisis, and the classic communication steps come into play – (1) apologize, (2) address the problem, and (3) make sure it doesn’t happen again.

·       Apologies can be tricky. A mere acknowledgment would go a long way in assuaging the wounded. These people are, after all, customers and hopefully future customers. They need to know that financial services institutions are committed to bringing their respective companies and especially their customers though this difficult period. Think Obama March 2008, bravely taking the race issue on front and center and then putting it behind everyone in the campaign. Look the issues dead in the eye and then move forward.

·       Addressing the problem will be far more complicated. While Occupy Wall Street has now expanded to mean “mad about everything”, the initial movement was able to cast a net around why this movement and why now. Too many student loans. No jobs to pay them back. Taking these two concerns as the premise of the movement, we can begin to address them through education and action.

·       Macro-economic Schooling: Consider that Occupy Wall Street is a microcosm of society. It is pretty clear that the demonstrators do not understand the global financial dynamics that are causing the drag on recovery. This is clear in their accusations heralded at the vaguely defined “Wall Street.” A financial education program that was honest, direct and delivered with straightforward language would be appreciated by everyone – far beyond the protestors. With greater understanding of domestic and global economic conditions, individuals can make better judgments for gauging progress and assessing the role of government and private sector in the progress.

·       Take on the Jobs Issue: Financial services companies take on a myriad of needs through their corporate responsibility program and foundation work. Why not take on the jobs issue first hand? Howard Schultz of Starbucks (NASDAQ: SBUX) has been the first to take a step in that direction with its “Jobs for USA” program. Not that Starbucks can cure job market woes with a $5 million donation and themed bracelets for sale, but it’s interesting to see business take action with tangible steps toward solutions. Even while unemployment stays stubbornly at 9.2%, thousands of jobs – largely tech-based – remain unfilled based on the lack of individuals with the right skills. Financial services companies could fund jobs retraining programs for individuals with the right backgrounds to traverse the skills gap. By showing that they are taking the job issue on directly, companies could demonstrate their recognition of the problem and their determination to be part of the solution.

·        Making sure it doesn’t happen again is the final and often the most important step in moving through a crisis. The steps taken in this phase need to be real and long-lasting. Guided by the initial focus of Occupy Wall Street, it is the intersection of joblessness and debt that are causing widespread anxiety. For students, the feeling is that they were duped by “Wall Street” by making the debt so easily available to them for expensive educations only to rob them of jobs through market greed and short-sightedness. Making sure it doesn’t happen again requires education and remediation. 

·       Financial Education: Just like every other type debt, student aid was easy to get and enthusiastically encouraged. Certainly, no one foresaw this long lasting economic downturn, but the lax lending practices were at the heart of the crisis broadly. University-based financial education should be the center piece of financial services companies presence on-campus and online for this demographic. Companies are already there recruiting. If they are seen as a solid corporate citizens, those recruiting goals would be even easier.

·       Take a Stand on Regulatory Reform: The general consensus is that financial services companies are pushing back on government efforts for regulatory reform. Frustration is felt because of the endless debate that doesn’t seem to result in any concrete reform efforts. This is where the lack of leadership is felt most harshly. With Washington firmly planted in presidential election mode, the opportunity is rich for financial services companies – even collectively – to propose regulations that  safeguard long-term financial security for all. The public (not just Occupy Wall Street) needs to know this situation won’t happen again. 

Without leadership and understanding, it’s not surprising that frustration is coming to a head – and not just in the United States. Remember, every protester is joined by thousands more equally frustrated and likely to take this angst out in other ways, like a lack of customer loyalty. Tackling the issues isn’t just the right thing to do, it’s good for the bottom line.

(Image: Wikipedia)