A crisis at the center

John Lee is a 38 years old migrant worker in Singapore. He left his family from a third world country in search for a greener pasture in a first world economy.

Two years after working as a contract staff in an IT company he made a major decision to uproot his family and bring them to Singapore, from then on he is forced by necessity to use credit cards and get into a cycle of debt.

His credit card debt climb up further when his application for permanent residency was approved and 20% of his salary has to go to his CPF. Every now and then he has to use his credit cards to pay the minimum balance of his other cards. A cosmetic solution, that he knows, does not address the real cause of his debt.

The reasons for his burgeoning debt is not about over-spending, it is about the increasing cost of the basic necessities in life like food, clothing and shelter.

This situation of migrant workers is common not only in Singapore more so in other first world economies in US, UK and Australia. High-paying middle class migrant workers are being lured into credit card spending. Every night they hear and watch the advertisements in TVs, flashing in web pages via Internet, and even in the billboards of bus stops and terminals showcasing the world of entertainment and consumption-driven urban culture. The problem is compounded by the fact that John Lee has no background in money management, and he was and he is in that stage of debt denial condition.

The causes and problems enumerated in the previous section suggest that the casualties of consumer debt crisis are those at the center of the pyramid. The middle class workers who need to go to office everyday, need to wear nice office attire, need to buy shoes, need to consume expensive perfume and cosmetics, need to pay phone bills, broadband bills, and PUB bills, need to consume shampoo, need to go to saloon, need to have a decent meal in the city and occasionally need to go out with friends and socialize, need to pay taxes, need to get into continuing education, need to rent a house and survive in a city life where the only thing constant is the rising cost of living.

They are the so-called “high paying” white collar jobs Walter Wriston of Citibank had thought about as he proposed to extend his credit card operation in South Dakota way back in 1980. 5

The same class of people who are there building the wealth of nations are the same people who are now drowning in huge debts and one day they will have to face the trauma, as Elizabeth Warren of the Center for American Progress 6 puts it, of home mortgage foreclosures, car repossessions, credit card defaults, and worst bankruptcy.

Consumers compulsively mortgage their future to boost society’s expenditures, manufacturers and producers exceed their consumption of fossil fuels to meet the demands of consumers and accumulate wealth.

Consumers are conditioned by media to do more and more shopping. The result is over-heating factories that produce air pollution and precipitate into climate change and global warming.

It looks good for the nation’s balanced economic scorecard as it translate into positive economic growth when the consumption + investments + production + distribution equal positive outcome. But when the consumption variable is driven by consumer credit card spending or through unsecured personal loans, risk and sustainability becomes a major concern. This problem is compounded by the net effect of global warming and climate change.

We need not an economist or a PhD title-holder; we don’t have to be an Albert Einstein to understand the gravity of the problems the world is facing.

Common sense dictates that sooner or later we will have to make a choice and the choice we make will have far reaching consequences impacting not only the future of our children but also the capacity of the planet Earth to support life.

To be fair, the biggest chunk of society’s expenditure is actually pumped by the government. The government would normally spend huge amount of money on strategic projects to boost economic growth. I understood this wisdom while reading a book from an economist himself, Stephen Leeb, PhD and I quote in part:

“Today we know that the right medicine in times of economic contraction is to spend like crazy and pump the economy full of money….

Regardless, the experience of the “Great Depression” and World War II taught America a clear lesson: Spending and creating liquidity is the way to stave off a severe economic decline, not balancing the budget.”

To solve the problems of consumer debt, the root causes identified in previous sections must be addressed both at the personal level and at a level that requires intervention by interest groups and other forums where the issues are properly ventilated, facts are gathered, dissenting opinions are heard, issues are further re-framed based on incoming anecdotal evidences, developing causal linkages between consumer debts and global warming issues, setting out options, and formulating solutions that are agreed upon by the affected sectors including the government.

We prescribe solutions to the problem at the personal level by picking up behaviors that addresses the root causes, has huge impact and does not require training and skills development. People just need to be motivated and empowered to make a difference through change in individual behaviors discarding old habits that commercial marketing has mold them to be.