Helaine Olen’s attack on the personal finance industry, Pound Foolish, is animated by a nice, original idea, which is that personal finance represents the downside of the empowerment society. Once upon a time, ordinary Americans had unions, pensions, predictably rising incomes, and government protections to look out for them. Global trade, with its corollary of stagnant middle-class incomes and declining political support for social spending, put an end to all that. So as the social safety net became frayed in the waning years of the 20th century, Americans were sold a bill of goods: The notion that by putting a few pennies into their 401(k)s each month, ordinary people could assure a comfortable retirement and maybe grow rich. “It was presented as empowering, an almost surefire way of avoiding economic catastrophe.” But the dream was a chimera.
Or as Olen, a former personal finance columnist herself, explains: “It occurred to almost no one that we were looking to personal finance, real estate, and the stock market to fix long-term economic problems. Our increasingly individualistic culture caused us to embrace a self-help approach to what was clearly a greater social issue.” As a result, today we’re faced with a sprawling self-help industry, a virtual army of supposed personal finance experts, some of them highly glamorous and overly compensated for peddling advice.
While Olen shows little sympathy for stock market media stars, such as Jim Cramer, or for the well-known brokerages and financial service firms, she devotes most of her breezy, 236 pages to filleting the gurus, pundits, self-anointed experts, crackpots, cranks, and outright frauds who populate the backwaters and slipstreams of American finance. She has little to say about Merrill Lynch or Fidelity and very much to say about Suze Orman and Dave Ramsey. Each is a specimen of a distinctly American tribe: the spiritual savior posing as financial expert.
“There is something compelling about Orman,” Olen writes, and though the author never quite pins down what it is, we gather that Orman preaches that financial success is less a matter of price-earnings ratios than of faith in oneself, courage, belief—the virtues, if not of Donald Trump, then of an earnest Little Leaguer. Olen has a good deal of fun with Orman, as she does with Ramsey, who preaches that debt is evil and that bankruptcy is a moral failing (although Ramsey, personally, acquitted himself of each). My favorite segment concerns Robert Kiyosaki, a former Xerox salesman turned motivational guru, who sells high-priced seminars during which he urges attendees to pay for longer, more expensive seminars.
The author identifies these financial waterfowl as outgrowths of the self-help movement of the 1970s, though they are also derived from religious revivalism. Americans, with their strange belief in improvability, have always been prey to conmen selling Jesus or instant riches or enduring health. American finance itself—the author seems unaware—has a long tradition of boosterism. (It was in 1929, just before the big crash, that the Ladies Home Journal counseled, “Everybody Ought to be Rich.”)
Olen’s writing contains some vivid reportage, but much of her material feels lifted too quickly from secondary (online) sources. She wants us to know that she is aware of John Maynard Keynes and, in trying to dampen the general enthusiasm for long-term investing, writes: “Au contraire, my friend. As John Maynard Keynes once observed, life is lived in the short run.” Excuse-moi. When Keynes observed that in the long run we are dead, he was speaking of the ill-wisdom of embracing recession en route to later prosperity. He was, in fact, a devoted investor, often with a long-term horizon.
Similarly, her prose shows signs of laziness. Large amounts of dollars are “megabucks” and Americans’ salaries “relentlessly did not keep up.” The more substantive criticism is that she conflates two valid observations—one regarding middle-class troubles, the other on financial hucksterism—to derive an invalid critique. Financial professionals are not responsible for knitting the safety net, though Olen makes it sound as though they are. She argues that personal finance goes off course when “severed from its political roots,” but we do not expect our broker to be versed in John Stuart Mill, nor should we. She criticizes virtually every aspect of finance, but—like the Occupy Wall Street movement she praises—has no suggestion for what finance should be. Once or twice she has a nice thing to say about index funds, and she concludes that personal finance can make a “valuable contribution,” but she lacks a core principle (such as a preference for genuine investing based on the economic fundamentals as distinct from speculation) that would have served her in defining what that “contribution” should be.
Ultimately, she drops her admirable, feisty skepticism and recommends financial therapy so people who overpay for bad advice can now pay for empathy and analysis. Personally, I’d rather spend it on options. No doubt, consumers unable to make their mortgage payments are easy prey for con artists. But the question of how to sustain or recoup middle-class lifestyles is wholly separate from the question of what Wall Street can do for Main Street. And on this subject—aside from urging us to avoid the obvious and deplorable scams—Olen has relatively little to say.