Trust Funds

Originally published October 15, 1984

I SEE by the papers that the New York State Education Department is preparing a new social studies curriculum that will include a year’s course in economics in the 12th grade. They did not have anything like that when I was in high school, so my initial reaction to the news is that it can’t be a very good idea. On second thought, I will allow that it might be all right if they ran the course my way (which they probably won’t, I reflect sourly). And that thought leads me to wonder how I would go about it if I had my druthers.

I should perhaps say at the outset that I come by my sourness in the line of duty. I once had to edit a text on educational psychology, and it almost turned my brain to oatmeal. Somewhat later I wasted several years attempting to put together a series of secondary-school literary anthologies. I’d had some experience with college-level anthologies; but professional educators, it developed, were unanimously of the opinion that what succeeded with 18-year-olds was quite different from what 17-year olds could or should be interested in. I didn’t believe it then, and I still don’t. That there is a difference, I recognize. That it is as great as pretended by those who call themselves educationists, I doubt. In any event, I think it should be an objective of an educational program to narrow the difference.

In the year boys and girls are graduated from high school, they become young men and women old enough to vote.  Not old enough to drink (who is?), but old enough to vote and bear arms.  About half of them will go to work at on now embroil myself in the question of whether some familiarity with our literary heritage would make them better citizens leading fuller lives.  Certainly, however, it does seem altogether fitting that some effort should be made to teach them how the world of work works.

The difficulty, of course, is that we grownups don’t agree on how the world of work works.  There is scant chance of satisfying both the Democracy Project and the American Enterprise Institute.  What pleases the AFL-CIO doesn’t always please the Business Roundtable.  It is happily no longer fashionable for us to call each other Communists (I was astonished to learn the other day that the John Birch Society still exists[1]), but we nevertheless generate a good many British Thermal Units in charging each other with operating a front for special interests.

On the record, the schools are entitled to anticipate a lot of trouble when they start to teach economics.  It will not be surprising if they try to avoid this by reducing the whole enterprise to the lowest common denominator of their students’ capabilities and fancies.  Such solutions are not unheard of.  Yet in the case of economics the lowest common denominator is likely to be that of our grownup prejudices, and the resulting pablum[2] is liable to be not merely non-nourishing but positively poisonous.  The world of work is not an uncomplicated, noncontroversial place, and it is dangerous for citizens to think that it is.

The first problem in any course is to decide what the emphasis is to be.  As it happens, I can lay my hands on the opening sentence of a book I’ve been writing, which goes like this:  “We will define economics as the study of the principles whereby people exchange money for goods and services.”  Although I go on to say that “people” is the most important word in the definition, I think that with 12th-graders I would choose to concentrate on another word: “money.”

No one should object to talking about money in a class on economics, and that’s what I would focus on.  Money is, in fact, an ideal subject to talk about with kids.  It is something everyone deals with every day; people discuss it all the time; and it provokes the most extraordinary notions.  In sum, it is both familiar and full of surprises.

Money is, moreover, the absolutely essential idea in economics.  Try to avoid it and all the other aspects of the course fall away of disappear.  What can you say about prices without mentioning money?  Obviously nothing, because prices must be stated in terms of some monetary unit.  Without money, what becomes of production or supply?  It reduces to agriculture or engineering.  Without money, what becomes of consumption or demand?  It reduces to physiology and psychology.  If you don’t have money, you don’t have economics.  You have all those other disciplines that are good in their own right, and are often confused with economics, but are not economics.

My first units (that’s educationese for chapters) would be on what happens when you go to work. You do what the job requires for a day or a week or (if it’s a classy job) a month, and then you get paid for what you’ve done. Nothing mysterious about that. But you have in effect lent your employer your earnings for the period. In the rare cases when you get paid in advance, your employer lends money to you. There is no way you can get paid instantaneously for the work you do each instant; so you and your employer have to trust each other.

Now, the interesting thing is that this mutual trust is creative. By working you have increased the goods in the economy, and by lending your employer your earnings you have increased the capital in the economy. This could not have happened unless your employer made the job possible; and if you had to be paid in advance, your employer would have less money to spend on machinery and materials.

There is a further role for trust. Not only do you and your employer have to trust each other, but you both have to have faith in the economy and in the nation that sponsors it. Your employer would not hire you unless he (or she) was confident (fides = faith) that there was a market that would pay good money for what the two of you are producing together; and you wouldn’t work unless you were confident the economy would let you enjoy the money you earn. The money you receive has no worth except as you are able to credit it as worthy of your trust.

In the other direction, money is what makes it possible for you and your employer to agree. You will do so much work for so much money. Without money, your relationship would at best be sharecropping and at worst slavery.

The stress in the initial part of the course would therefore be that money is faith, trust, credit. It is not paper or silver or gold. And the moral of the first part might be stated by paraphrasing Baron Heyst of Victory: “Woe to the [nation] that has not learned to hope, to love – and to put its trust in life.”

This moral, I am afraid, would be the hardest point to get across. I took my World War II basic training with a lot of kids from the Lower East Side of New York and from South Philadelphia (whites had of course been separated from blacks at the reception centers), and I was bewildered by the difficulty many of them had in even imagining the possibility of a disinterested action. They possessed what has since come to be called street smarts, and they suspected an angle to everything. Intellectuals, too, find trust a difficult idea, for intellectual smarts are a facility in uncovering unconscious motivations and special interests. And conservative smarts are a passion for gold that bespeaks a sentimental longing for something more trustworthy than the national economy and our fellow citizens.

So establishing the nature and need of trustworthiness would take time, especially since street, intellectual and conservative smarts are sadly often right in clinging to their suspicions in specific situations. For the sake of the economy, and for the sake of the individuals who participate in the economy, however, it is more important to do right than to be right.

By now we would probably be well into January or possibly February, and the next group of units would take some time, too. The subject would be fractional reserve banking and how it works. This is comparatively simple, though I doubt that even two of the next 20 people you meet could explain it to you. With time running out, the last group would be on private debt and public debt, and how they’re alike and unalike, plus maybe a hint or two about their connection with inflation and employment. This could be highly controversial, but mercifully the school year would be almost over.

Do you think it would be next to impossible to get these ideas over to 17-year-olds? I do, too. Yet I also think that if the next generation doesn’t understand money any better than the present generation, it won’t matter too much what else they learn about the economy. They’d be much better off reading those anthologies I never published.

The New Leader

[1] One wonders, reading such observations in 2012 what was considered, at least by the author, settled in 1984, what he would say were he here…

[2] Since Microsoft Word didn’t recognize the word a link seemed appropriate

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