Listen above to an interview I did today with Bernard Hickey from the excellent The Kākā Substack. It really is rather excellent and I can highly recommend you take a look if you haven’t already.
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Financial insecurity tightly constrains how we experience the world. It also limits the trajectories of life that may be available to us.
This is not about personal responsibility and having the resourcefulness or energy to ‘choose’ to do something about your situation. Many of these ‘choices’ are not available for us to make - not because we don’t have money at the moment, but because our entire relationship with money and its inter-relationship with how we meet our most fundamental needs have become warped.
Financial precarity means this is not a level playing field
In modern society, money is very much tied up in our sense of self-worth. I’m not talking about the amount of money you need to buy a flash car, or an iPhone.
I’m talking about the basics.
Not just feeding, clothing and housing ourselves and our loved ones, but also not sticking out and being socially identified as impoverished. Not being that kid with the gaping holes in their uniform, or shoes that are leaky or don’t fit. Or perhaps not having shoes at all.
A life of dignity, not unending shame.
And according to a report by the Child Poverty Action Group in 2017, over 1 in 4 children in New Zealand were living in relative income poverty. It’s unlikely things have got much better, especially in these inflationary times.
We often think that mental health issues cause poverty. But this simplifies and misrepresents the relationship in all kinds of ways. The link between poverty and children’s mental health is well recognised in a range of international research. This relationship not only affects childhood experience, but also extends out into adulthood too. Not only does impoverishment cause mental health issues, it also means people who are financially insecure just don’t have the bandwidth available, the luxury of being able to think about wide-ranging life issues and pleasurable pursuits in ways that people who are financially stable are able to do.
Scarcity ‘consumes your mental bandwidth’ …
It crashes your IQ by 13-points - that the equivalent to trying to think after being forced to stay up all night without sleep. That’s how powerful scarcity is.
Imagine that, day in, day out.
Financial insecurity corrodes your adaptive capacity
Think about it like this: when you have financial security, when you have money to deal with short-term stresses that need cash to solve them, you have a reserve of adaptive capacity that helps to smooth out the ups-and-downs of life. Sure, they may throw you off kilter for a while, and while money won’t solve everything, it can go a long way towards solving your problem. Other stresses that pop up during this time will be unpleasant, but are manageable.
People without that cash, without that financial security are going to not only feel that short-term stress a lot more because they know they don’t have the financial means to deal with them, but it then cascades to how they experience further short-term stresses: much more acute, and far more disturbing.
Constant financial insecurity can also change how we process information
Have a comfortable buffer of cash means that you’re less likely to see the world as a threat all the time. Stresses come and stresses go, but being financially stable enables you not only to think strategically and creatively but also not to ruminate and obsess about how to get yourself out of a tricky situation. Money helps you to move on and think differently.
However, tight financial constraints and / or a history of finding it difficult to make ends meet means that we can be a perpetual state of apprehension, seeing threat everywhere. Food prices, overcrowded houses causing family strife, and living in houses that are hard to heat. Parents are working multiple jobs and are preoccupied with navigating their way through a tough world and not being able to spend enough time with their kids, even though they desperately want to.
“A person in poverty might be at the high part of the performance curve when it comes to a specific task and, in fact, we show that they do well on the problem at hand. But they don’t have leftover bandwidth to devote to other tasks. The poor are often highly effective at focusing on and dealing with pressing problems. It’s the other tasks where they perform poorly.”
“The fallout of neglecting other areas of life may loom larger for a person just scraping by... Late fees tacked on to a forgotten rent payment, a job lost because of poor time-management — these make a tight money situation worse. And as people get poorer, they tend to make difficult and often costly decisions that further perpetuate their hardship” - Eldar Shafir, Princeton’s William Stewart Tod Professor of Psychology and Public Affairs
The luxury of bandwidth
This is not a delusion: the world really is a harsher place when we are financially insecure. We have fewer choices available, and our minds are fixed on solving the problem in the here-and-now.
This is how the brain works. Creative, playful, sensitive and strategic thinking are luxuries our brains afford us when the threat has passed. If we are in a constant state of threat-management, we seldom experience these brain states. We are just focused on managing the latest in a long line of seemingly never-ending stresses. We can become both aggressive in trying to fight the latest threat, yet also feel helpless in the face of overwhelming odds.
Here is the plausible link to not only limited choices and seemingly ‘bad decisions’ as they have been framed, but also to how these states can be passed on from one generation to another. Growing up in financial insecurity seriously impoverishes the time you get to spend in creative or strategic states that are playful or can focus on the long-term. You grow up in an environment of trying to manage the here-and-how, and how threatening this can be.
So we learn to solve, or most likely, try to live with, these problems, and the social stigma and impoverishment that comes with them. You can’t take part in a ‘normal’ life in a society like others all around you do. Or we get left behind by friends who carry on doing what ‘normal’ people do. And we become more isolated, more alone, and we feel more stress.
This is the impoverishment funnel
This is not a ‘choice’.
It’s survival.
It’s existing, not living.
As a society, we can decide on whether we want these inequalities, these distortions, to remain.
If we accept that financial insecurity is a key factor in what leads people down the impoverishment funnel, then what should we do?
Shouldn’t we be able to live a life where we can access not only the bare essentials but also what enables us to live a public life with dignity?
Lack of income is a fundamental problem that needs to be fixed in a just society. A parallel approach might also be to remove the income requirement to access key services, such as making public transport and access to key social, health and cultural amenities free.
The situation is critical.
As a society, are we prepared to get out of threat-management mode and lift our head beyond the three-year parliamentary cycle of short-term fixes?
Can we think strategically and creatively for the long-term?
Because unless deal with the inability of people to meet their basic needs through adequate income and services, we are dooming them to ‘choices’ they have no control over, and wilfully impoverishing generations to leading diminished lives, and stripping them of their dignity.
It is that stark.
Will we choose to intervene?
We have the financial bandwidth to choose a national poverty reduction programme to improve lives and break inter-generational cycles of poverty, improve the social determinants of wellbeing and break the shackles of financial insecurity.
Imagine the pain it would diminish and the creative and strategic thinking it could unleash.
As far as policy programmes go, this is a no-brainer.
Poverty is rising. Will we turn a blind eye?