Follow-Up: Beyond Our Means

On December 13, 2011 the Asset Building Program hosted Professor Sheldon Garon, author of Beyond Our Means: Why America Spends While the World Saves. While economists often claim people save according to universally rational calculations — saving the most in their middle years as they plan for retirement and saving the least in welfare states — there are substantial differences in savings rates across high income countries. For example, Europeans save at relatively high rates despite generous welfare programs, while Americans save little, despite weaker social safety nets. The assumption that generous social benefits will provide a disincentive to save doesn’t hold up.

Tracing the development of such behaviors across three continents from the nineteenth century until today, Professor Garon argues there is much to be learned by comparing savings and spending habits across the world. The book explores how some countries have fostered enduring cultures of thrift, supported by pro-savings policies, pro-savings institutions and national campaigns. Justin King, Federal Policy Liaison with the Asset Building Program, introduced the author and provided some additional context to his work. In his presentation, Professor Garon highlighted a number of savings initiatives from the 1800s to the present across Europe, Japan, and the U.S. As a professor of both history and East Asian Studies, Garon is well positioned to dissect the impact of culture, institutions, and policy over time on today’s savings rates in higher income countries.

Professor Garon structured his talk around several key programs that have encouraged savings, including Postal Savings Banks and School Savings Banks, introduced first in Europe in the mid-1800s. Savings Banks provided accessible small-dollar savings opportunities for working people. Government leaders connected expanded banking opportunities with the process of nation-building. People with money in the bank had a more tangible stake in the country and therefore would be less likely to rebel. The Japanese adopted the Savings Bank concepts in the mid and late 1800s and they took root – the Postal Savings Bank is the largest in Japan today.  

While Americans dabbled in many of these initiatives as well, today there are few remnants of these systems. A Postal Savings Bank was created in 1910 but was abolished in 1966. School Savings Banks popped up in New York and Minneapolis in the 1920s but they ultimately gave way to pressure from commercial banks. The two World Wars of the twentieth century provided an opportunity for government leaders to promote savings as part of the war effort – a civic duty to be thrifty. Post-World War II savings rates in the U.S. were higher than they are today but still below the rates in Germany and Japan. Instead of saving, Americans turned to widely available credit, particularly as deregulation of credit in the 1980s expanded access. Credit, Professor Garon suggests, has become our version of social welfare.  Increased access allowed an overreliance on credit that, combined with such low rates of savings, contributed to the recent economic crisis and ongoing difficulties weathering the slow recovery of the Great Recession. Professor Garon concluded his remarks by outlining a few of the policy recommendations from his book. In particular, he emphasized the importance of financial inclusion to a strong democracy.

Ray Boshara, Senior Advisor at the Federal Reserve Bank of St. Louis, responded to Professor Garon’s book, commending him on a well-timed and detailed account of savings habits through time. Mr. Boshara noted with interest the pattern of wartime savings initiatives, which have served to mobilize the populace around a common goal to save. He also considered the use of language and contemplated how well the terms “asset building” and “financial inclusion” fare in public and political discourse. Mr. Boshara also encouraged Professor Garon to more thoroughly investigate the potential roles for private markets and technology in both the history of savings and the promotion of savings down the road.

The webcast of the event is available here.


Hannah Emple
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