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The Economic Decline of the Family
False Promises of Liberalism
By Darek Klonowski
Throughout history, it has been generally axiomatic that a family is able to improve their economic standing from one generation to another. Families have been historically focused on their ability to generate sufficient income to pay for basic needs and life-enriching experiences, to afford a comfortable and safe family home, to maintain a satisfactory and fulfilling career, to access quality education for their children, and to meet basic retirement goals. However, young adults are now in danger of never achieving these key family objectives because they are expected to be worse off than their parents, something that is historically unprecedented.
International evidence points to a widespread and persistent decline in the economic standard of living for the family. This financial deterioration is a direct result of stagnating wages, the rise of unemployment, a decline in labor participation, poor housing affordability, limited savings, and skyrocketing personal debt. When examining average wages in the United States, as an example, and when adjusted for inflation, it becomes evident that Americans have not seen any meaningful increases in their purchasing power over the last 40 years. While real wages remained constant between 1978 and 2018, they actually declined between 1978 and 1995, which represents a 17-year period of decline that was then followed by a 23-year period of slow increase until 2018. The major employment trends that reinforce these wage characteristics include massive shifts from manufacturing to low-paying sectors of the economy, rapid increases in precarious employment, and the “financialization of everything.” These trends no longer only affect individuals who are often regarded as underprivileged and disadvantaged clusters of the populations; they now impact swathes of society at large.
These negative trends are not without tangible consequences for the family. In the United States, for instance, there are about 36 million Americans who rely on food stamps and donations, 8.6 million individuals who earn incomes below the poverty line, and approximately 27 million people who do not have health insurance. Roughly 62 percent of Americans do not have $1,000 or more in cash savings, and 13 percent of Americans live in poverty (this rate is double for single parents). About 29 percent of Americans postpone their medical appointments, 23 percent are not able to afford medication, and 19 percent reduced their recommended medication doses due to cost. About 40 percent of respondents also confirmed that they live paycheck-to-paycheck. In addition to these concerning figures, a breakdown of the American Dream of home ownership is abundantly evidenced by foreclosure statistics. House foreclosures are also frequently connected to divorce, illness, and other unexpected yet simultaneously detrimental events. The financial weakness of the American family is furthermore reflected in the fact that a significant percentage of new mortgages were financed with a minimal down payment (less than 10 percent of the value of the house) and about a quarter of mortgages were issued to people who were financially broke.
Of course, the United States is not an exception in this category, but rather the norm as the local economic dreams for an average family in the United Kingdom and Canada are similarly delusionary. In Canada, for example, the dream of house ownership is under assault due to the high cost of acquiring a house and its subsequent maintenance. In fact, a significant percentage of Canadians are actually “house poor”, which is the case when more than 30 percent of an individual’s disposable income is directed toward covering house related costs, including mortgage expenses. Housing in the United Kingdom has also become less affordable over the decades: in 1974, it took an equivalent of four annual incomes to acquire an average house while it took eight yearly incomes to achieve the same in 2019. Of course, one fundamental difference is that individuals are now able to borrow more from financial institutions than ever before.
Thus, to assist academics, researchers, advanced students, and policy makers in understanding the enormously complex corpus of information, data, and practical thinking related to the economics of the family, in addition to the many associated polemics that this topic generates, Cambridge Scholars Publishing has announced The Economic Decline of the Family. Written by Darek Klonowski, Professor of Business Administration at Brandon University (Canada) and a former private equity professional, this book offers a comprehensive analysis of the historical reasoning behind the decline in the economic wellbeing of the family. This important matter is considered in the context of economic development, political and social changes, and ideological shifts in three Anglophone countries (namely, the United States, the United Kingdom, and Canada). To achieve his purpose, Klonowski focuses on a data set that spans a period of over 50 years between 1965 and 2018.
This book reaches a number of conclusions, the first of which is that modern liberal economics has failed the family. This failure occurred as a result of liberal economics’ divergence from classical metaphysical foundations, redefinition of morality and ethics, departure from its original and distinctive orientation towards the political economy, removal from everyday human reality, excessive “mathematization,” and disproportionate emphasis on hyper-individualism, commoditization of labor, and free markets. Another focal point of modern economics is relentless profit maximization, the danger of which was noted by Heinrich Pesch in his Ethics and the National Economy through the proverb fiat quaestus et peat mundus, or “strive for profit and let the world be dammed.” Moreover, modern economics desires consumers to be simultaneously wealthy, for the sake of generating strong market demand and consumption, and poor, in order for capitalists to reduce labor costs in return for greater profits. Modern economics forgets, of course, that both the consumer and the laborer are the same individual. In line with its historic antecedents, modern liberal economics continues to misalign the interests of consumers, producers, individuals, and families. In simple terms, and as noted by Professor Ha-Joon Chang in his book 23 Things They Don’t Tell You About Capitalism, “economics, as it has been practiced in the last three decades, has been positively harmful to most people.” Additionally, the troika of modern liberal economics, which comprises privatization, austerity, and reduced corporate taxation, further aggravates the already weakened family economics.
The second major conclusion reached in The Economic Decline of the Family is that, based on empirical evidence gathered over a span of 50 years, ideological shifts from one political leader to another do not make any significant difference in the family’s everyday life. When the four economic indicators critical to the family are analyzed in the context of the United States, for example, the difference in performance between Democratic and Republican Presidents has been minimal or even negligible over this 50-year time period. These marginal differences indicate that there are no identifiable political leaderships that focus on improving the economics of the family. In other words, each political party is equally suboptimal in fulfilling this important objective. Moreover, these barely palpable differences should certainly not generate extensive or heated discussions, debates, disputes, and exclusion among family members and friends holding oppositional political views as, in essence, they are different versions of the same political, social, and economic reality that ultimately fails the family.
Thirdly, this book illuminates that one of the most detrimental features of the family in many countries is an elevated level of personal debt. This comes as no surprise as deteriorating wages, stagnating family incomes, limited savings, and increased precarious employment, coupled with an increased appetite for consumption, can only lead to skyrocketing personal debt. For instance, the average level of personal debt in Canada has continued to rise beyond 1.8 dollars of debt per 1 dollar of disposable income. The consequence of increased personal debt is the economic enslavement of the family; simply put, this is familial debt servitude.
While the period between 1965 and 2018 was economically challenging, the new, post-COVID-19 era promises to be even more difficult for the family. Although this new era is not covered in the book, it is easy to extrapolate the historic economic trends and understand that the added pressure from the pandemic would lead to a rise in job security concerns, sharply increasing prices of goods and services, financial issues for small businesses, and so on. These concerns will only further the detrimental economic position of the family, as they will most likely experience the harshest economic stress.
Darek Klonowski, PhD, is a Professor of Business Administration at Brandon University, Canada, where he teaches courses in finance and venture capital. Prior to joining academia, Klonowski worked in the venture capital and private equity industry. In recent years, he has authored and edited books on venture capital and private equity, including The Venture Capital Investment Process (2010, 2013); Private Equity in Poland: Winning Leadership in Emerging Markets (2011); Private Equity in Emerging Markets (2012; ed.); The Venture Capital Deformation (2017); Entrepreneurial Finance in Emerging Markets (2020; ed.); and Venture Capital Redefined (2021). He has also completed two book projects on entrepreneurial finance, namely Critical Concepts in Finance: Entrepreneurial Finance (2014, ed.; four volumes) and Strategic Entrepreneurial Finance: From Value Creation to Realization (2014).
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